Annual and Transition Report (foreign Private Issuer) (20-f)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2017

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 333-202600

NATCORE TECHNOLOGY INC.
(Exact name of registrant as specified in its charter)

British Columbia, Canada
(Jurisdiction of incorporation or organization)

Natcore Technology Inc., 189 N. Water Street, Suite 700, Rochester, NY 14504-1163
(Address of principal executive offices)

Charles Provini, 189 N. Water Street, Suite 700, Rochster, NY 14604-1163,
(585) 286-9180
info@natcoresolar.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act: None

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Common Shares, without par value
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

At December 31, 2017 the registrant had 78,163,435 common shares issued and outstanding

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [X]

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ ] No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [ ] Emerging Growth Company [X]

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

US GAAP [ ]	International Financial Reporting	Other [ ]
	Standards as issued by the International
	Accounting Standards Board [X]

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 [ ] Item 18 [ ]

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court: N/A .

TABLE OF CONTENTS

GENERAL			7
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			7
STATUS AS AN EMERGING GROWTH COMPANY			7
CURRENCY			8
FOREIGN PRIVATE ISSUER FILINGS			8
Part I			10
	ITEM 1 – IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		10
	ITEM 2 – OFFER STATISTICS AND EXPECTED TIMETABLE		10
	ITEM 3 – KEY INFORMATION		10
	A.	Selected Financial Data	10
	B.	Capitalization and Indebtedness	12
	C.	Reasons for the Offer and Use of Proceeds	12
	D.	Risk Factors	12
	ITEM 4 – INFORMATION ON THE COMPANY		22
	A.	History and Development of the Company	22
	B.	Business Overview	28
	C.	Organizational Structure	34
	ITEM 4A - UNRESOLVED STAFF COMMENTS		35
	ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS		35
	A.	Operational Results	36
	B.	Liquidity and Capital Resources	40
	C.	Research and Development, Patents and Licenses	41
	D.	Trend Information	46
	E	Off-Balance Sheet Arrangements	46
	F.	Tabular Disclosure of Contractual Obligations	46
	ITEM 6 – DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		46
	A.	Directors and Senior Management	46
	B.	Compensation	49
	C.	Board Practices	55
	D.	Employees	58
	E.	Share Ownership	59
	ITEM 7 – MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		59
	A.	Major Shareholders	59
	B.	Related Party Transactions	60
	C.	Interests of Experts and Counsel	61
	ITEM 8 – FINANCIAL INFORMATION		62

	A.	Consolidated Statements and Other Financial Information	62
	B.	Significant Changes	63
	ITEM 9 – THE OFFERING AND LISTING		63
	A.	Offering and Listing Details	63
	ITEM 10 – ADDITIONAL INFORMATION		64
	A.	Share Capital	64
	B.	Articles and By-laws	64
	C.	Material Contracts	64
	D.	Exchange Controls	64
	E.	Taxation	64
	F.	Dividends and Paying Agents	69
	G.	Statement by Experts	69
	H.	Documents on Display	69
	I.	Subsidiary Information	69
	ITEM 11 – QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK		69
	ITEM 12 – DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		70
PART II			71
	ITEM 13 – DEFAULTS, DIVIDEND ARREARS AND DELINQUENCIES		71
	ITEM 14 – MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		71
	ITEM 15 – CONTROLS AND PROCEDURES		71
	A.	Disclosure Controls and Procedures	71
	B.	Management’s Annual Report on Internal Control Over Financing Reporting (“ICOFR”)	71
	C.	Attestation Report of Registered Public Accounting Firm	72
	D.	Changes in Internal Controls Over Financial Reporting	72
	ITEM 16A – AUDIT COMMITTEE FINANCIAL EXPERT		72
	ITEM 16B – CODE OF ETHICS		73
	ITEM 16C – PRINCIPAL ACCOUNTANT FEES AND SERVICES		73
	ITEM 16D – EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		73
	ITEM 16E – PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		73
	ITEM 16F – CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		73
	ITEM 16G – CORPORATE GOVERNANCE		73
	ITEM 16H – MINE SAFETY DISCLOSURE		74
PART III			74
	ITEM 17 – FINANCIAL STATEMENTS		74
	ITEM 18 – FINANCIAL STATEMENTS		74
	ITEM 19 – EXHIBITS		74

	A.	Financial Statements and Notes	74
	B.	Exhibit List	74

GENERAL

As used in this Annual Report, the “Company” refers to Natcore Technologies Inc., a company existing under the Business Corporations Act (British Columbia).

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F (“Annual Report”) and the exhibits attached hereto contain “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation that involve risks and uncertainties relating, but not limited to, Natcore’s current expectations, intentions, plans, and beliefs. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “target”, “intend”, “estimate”, “could”, “should”, “may” and “will” or the negative of these terms or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Examples of forward-looking information in this Annual Report include: the Company’s anticipated future business strategies, the Company’s plans and expectations for its technologies, the timing and amount of estimated future revenues and sales, costs of goods and services sold, capital expenditures, costs and timing of the development of new technologies, future sales of products and technologies produced by the Company, success of the Company’s research and development activities, patenting time lines and availability, the Company’s ability to meet its working capital needs in the next twelve months and thereafter, requirements for and availability of additional capital; and growth in the solar industry.

Certain of the Company’s expectations concerning the use of and applications for its technologies, as well as the success of its research and development programs described herein also contains statements concerning the Company’s proposed use of funds and timing for expenditures as well as general expectations regarding revenues and the growth of the solar cell market. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events, results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors include, among others: risks related to product and technology development, including product obsolescence and the experimental nature of the Company’s business, limited protections of patents and proprietary rights, changes in national and local government, legislation, taxation, controls, regulations and political or economic developments in the Canada and the United States or other countries in which the Company may carry on business in the future, including changes in the regulatory environment for the oil and gas industry, delays in obtaining patents, economic factors including competition, foreign exchange rate fluctuations, fluctuation of securities prices and prices of commodities; as well as those factors described in the section entitled “Risk Factors” herein below.

Shareholders are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Natcore reviews forward-looking information for the purposes of preparing each Annual Report, however Natcore undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

STATUS AS AN EMERGING GROWTH COMPANY

Natcore is an “emerging growth company” as defined in Section 3(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and is subject to reduced public reporting requirements. Natcore has chosen not to take advantage of the extended transition period for new accounting standards. While the decision to opt out of the extended period to comply with new or revised accounting standards is irrevocable, the Company may in the future elect to avail itself of other reduced reporting obligations available as an emerging growth company. Natcore will continue to qualify as an “emerging growth company” until the earliest to occur of: (a) the last day of the fiscal year during which the Company had total annual gross revenues of US$1,000,000,000 (as such amount is indexed for inflation every five years by the SEC) or more; (b) the last day of the Company’s fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement under the Securities Act; (c) the date on which the Company has, during the previous 3-year period, issued more than US$1,000,000,000 in non-convertible debt; or (d) the date on which the Company is deemed to be a “large accelerated filer”, as defined in Exchange Act Rule 12b-2. Natcore expects to continue to be an emerging growth company for the foreseeable future.

Generally, a registrant that registers any class of its securities under section 12 of the Exchange Act is required to include in the second and all subsequent annual reports filed by it under the Exchange Act, a management report on internal control over financial reporting and, subject to an exemption available to registrants that are neither an “accelerated filer” or a “larger accelerated filer” (as those terms are defined in Exchange Act Rule 12b-2), an auditor attestation report on management’s assessment of internal control over financial reporting. However, for so long as the Company continues to qualify as an emerging growth company, the Company will be exempt from the requirement to include an auditor attestation report on management’s assessment of internal controls over financial reporting in its annual reports filed under the Exchange Act, even if the Company were to qualify as an “accelerated filer” or a “larger accelerated filer”. In addition, Section 103(a)(3) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) has been amended by the JOBS Act to provide that, among other things, auditors of an emerging growth company are exempt from any rules of the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the company.

CURRENCY

Unless otherwise indicated, all references to ($) dollar amounts are expressed in the lawful currency of the United States of America.

FOREIGN PRIVATE ISSUER FILINGS

Natcore is considered a “foreign private issuer” pursuant to Rule 405 promulgated under the Securities Act of 1933, as amended (the “Securities Act”).In its capacity as a foreign private issuer, Natcore is exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, Natcore’s officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of the Company’s common shares. Moreover, Natcore is not required to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. In addition, Natcore is not required to comply with Regulation FD, which restricts the selective disclosure of material information.

For as long as Natcore is a “foreign private issuer” it intends to file its annual financial statements on Form 20-F and furnish its quarterly financial statements on Form 6-K to the SEC for so long as it is subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act. However, the information Natcore files or furnishes may not be the same as the information that is required in annual and quarterly reports on Form 10-K or Form 10-Q for U.S. domestic issuers. Accordingly, there may be less information publicly available concerning Natcore than there is for a company that files as a domestic issuer.

Natcore may take advantage of these exemptions until such time as it is no longer a foreign private issuer. Natcore is required to determine its status as a foreign private issuer on an annual basis at the end of its second fiscal quarter. Natcore would cease to be a foreign private issuer at such time as more than fifty percent (50%) of its outstanding voting securities are held by United States residents and any of the following three circumstances applies: (1) the majority of its executive officers or directors are United States citizens or residents; (2) more than fifty percent (50%) of its assets are located in the United States; or (3) its business is administered principally in the United States. If Natcore loses its “foreign private issuer status” it would be required to comply with Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirement for “foreign private issuers.”

PART I

ITEM 1 – IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

ITEM 2 – OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3 – KEY INFORMATION

A. Selected Financial Data

The following tables set forth the Company’s selected consolidated financial data. Investors should read the following selected consolidated financial data in conjunction with the Company’s audited consolidated financial statements and accompanying notes in Item 18 of this Annual Report and “Operating and Financial Review and Prospects” included in Item 5 of this Annual Report.

Natcore’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpreted by the International Financial Reporting Interpretations Committee (“IFRIC”). As a result of the Accounting Standards Board of Canada’s decision to adopt IFRS for publicly accountable entities for financial reporting periods beginning on or after January 1, 2011, the Company adopted IFRS for the 2011 and 2010 annual financial statements.

Since Natcore began preparing its financial statements in accordance with IFRS, having reviewed significant transactions and compared them to United States generally accepted accounting principles (“GAAP”), Natcore concluded that there are no material differences that would impact the users of the accompanying financial statements other than terminology and headings.

The Company has derived the summary consolidated statements of comprehensive income data for each of the years ended December 31, 2017, 2016, 2015, 2014, and 2013 from its audited consolidated financial statements (included elsewhere in this prospectus).

As of December 31,
	2017	2016	2015	2014	2013
Expenses
Consulting	132,936	124,652	181,589	229,792	108,657
Depreciation and amortization	75,272	146,946	279,527	412,492	359,178
Filing fees	26,278	45,172	25,016	34,090	32,082
Foreign exchange (gain) loss	1,457	16,457	5,159	41,344	90,060
Interest and bank charges	7,804	2,698	2,383	1,581	1,269
Marketing	76,582	341,104	268,853	81,401	96,641
Office and miscellaneous	191,766	201,736	216,811	273,264	267,532
Professional fees	81,589	219,016	335,762	213,888	129,499
Research and development	861,947	1,137,422	1,203,716	1,634,864	1,480,058
Stock-based compensation	67,599	869,130	387,648	301,732	325,686

Travel	22,231	37,472	45,858	73,922	126,668
Wages	615,331	763,223	778,339	770,105	855,853
	(2,160,792)	(3,905,028)	(3,730,661)	(4,068,475)	(3,873,183)

Other Income (Expenses)
Fair value adjustments on warrants	885,673	1,880,587	226,827	1,842,317	(79,353)
Other Income	123	1,932	14,124	—	—
Interest Income	—	809	1,581	32,626	13,708

Net and comprehensive income (loss)	(1,274,996)	(2,021,700)	(3,488,129)	(2,193,532)	(3,938,828)

Loss per share - basic and diluted	(0.02)	(0.03)	(0.07)	(0.05)	(0.10)

Weighted average number of shares outstanding - basic and diluted	71,014,878	60,007,618	51,329,138	42,294,310	41,097,726

	As of December 31,
	2017	2016	2015
Assets
Current Assets
Cash and cash equivalents	56,391	23,252	521,521
Receivables	4,084	12,071	29,057
Prepaid expenses	7,568	55,187	148,076
	68,043	90,510	698,654

Non-Current Assets
Equipment	149,601	223,325	366,729
Intangibles	—	—	—
	149,601	223,325	366,729

TOTAL ASSETS	217,644	313,835	1,065,383

Liabilities and Equity
Current Liabilities
Trade payables and accrued liabilities	1,577,483	1,192,636	749,985
Derivative liability	267,077	367,346	1,135,157
	1,844,560	1,559,982	1,885,142

Equity
Share-based payment reserve	4,373,131	4,275,173	3,375,710

Share subscriptions receivable	—	—	31,102
Deficit	(23,213,638)	(21,938,642)	(19,916,942)

TOTAL DEFICIT	(1,626,916 )	(1,246,147)	(819,759)
TOTAL LIABILTIES AND DEFICIT	217,644	313,835	1,065,383

An investment in Natcore common shares involves a high degree of risk. Shareholders should consider carefully the risks described below, together with the financial and other information contained in this annual report. The occurrence of the risks described below could have a material adverse impact on Natcore’s business, financial condition or results of operations. In any such case, the trading price of Natcore common stock could decline and investors may lose part or all of his or her investment. Various statements in this annual report, including the following risk factors, contain forward-looking statements.

The Company is currently not profitable. There is no assurance as to whether the Company will be profitable, earn revenues or whether the Company will be able to return any investment funds, to make cash distributions or to meet its operating expenses and debt service, if any.

The Company’s independent auditor’s reports on its financial statements for the years ended December 31, 2017 and 2016 includes a “going concern” explanatory paragraph.

The Company’s independent auditor has presented the Company’s financial statements on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. However, the Company’s independent auditor has expressed some doubt as to the Company’s ability to continue as a going concern. This means that the Company may not generate enough funds to pay its general operating expenses and bills from professionals and other advisors that it is obligated to pay. Since the Company has not generated any revenues from operations, management intends to finance operating costs over the next twelve months with existing cash resources and the private placement of common stock. There may be situations where all sources of revenue described (or any revenue at all) may not be available given market conditions and customer requirements. The Company has had net losses in each of the last three fiscal years and as of December 31, 2017; the Company has had recurring losses from operations and a cumulative deficit of approximately $23,213,638.

There is no assurance that the Company will generate immediate revenues; the Company projects cash on hand will be insufficient to fund operations for approximately twelve months.

The Company anticipates that it will incur substantial expenses relating to the implementation of its business plan and cost overruns may be incurred. The Company currently expects the initial expenses it incurs to result in operating losses for the Company for the foreseeable future. Furthermore, no assurance can be made that a shareholder will realize any return on his or her investment, or that such shareholder will not lose his or her entire investment. The Company anticipates its current cash and cash equivalents will not be sufficient to fund operations for approximately twelve months. The Company intends to raise capital through the sale of equity securities in private placements, through shareholder loans or possibly through a registered public offering (either self-underwritten or through a broker-dealer). There is no assurance that any financing will e available to the Company, or if available, on terms that will be acceptable to the Company.

The Company’s ability to obtain the necessary financing to carry out its business plan is subject to a number of factors, including general market conditions and investor acceptance of its business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to the Company. If the Company is unable to raise sufficient funds, it will have to significantly reduce its spending, delay or cancel our planned activities or substantially change its current corporate structure. There is no guarantee that the Company will be able to obtain any funding or that it will have sufficient resources to conduct its business as projected, any of which could mean that the Company will be forced to discontinue our operations.

The Company’s management may prepare financial projections concerning the estimated operating results of the Company. These projections would be based on certain assumptions that may prove to be inaccurate and that are subject to future conditions be beyond the control of the Company, such as changes in the condition of the national and international financial markets, fluctuations in interest rates, changes in rules and regulations pertaining to the securities markets and market participants, variations in the local and national economy, acts of terrorism and occurrences of natural disasters or other such disasters. The Company may experience unanticipated costs, or anticipated agreements or contracts may not materialize, resulting in lower revenues than forecasted. There is no assurance that the results that may be illustrated in financial projections would in fact be realized by the Company. The financial projections would be prepared by Management of the Company and would not be examined or compiled by independent certified public accountants. Accordingly, neither independent certified public accountants nor counsel to the Company could provide any level of assurance on them.

Substantial corporate resources are currently being expended on the development of the Company’s technologies. These technologies remain in the development stages and have not yet been commercialized. There can be no guarantee that the Company’s technologies will achieve the objectives which Natcore believes are necessary for successful products in the market. In addition, there are risks associated with commercializing any product, including the risk that full-scale production may not be achieved at an acceptable cost level. In addition, since the Company’s technologies are in the development stage, there can be no guarantee that technical milestones can be achieved. Failure to successfully commercialize the Company’s technologies may materially and adversely affect the Company’s financial condition and results of operations.

The Company’s management makes all decisions with respect to the Company’s assets, including investment decisions and the day-to-day operations of the Company. Other than as specified in the Company’s notice of articles and articles, the shareholders have no right or power to take part in the management of the Company. As a result, the success of the Company for the foreseeable future will depend largely upon the ability of management.

SHAREHOLDERS ARE HEREBY ADVISED THAT THE SUCCESS OF PREVIOUS VENTURES OR PROJECTS UNDERTAKEN BY THE COMPANY’S MANAGEMENT OR THE MANAGEMENT OF ANY ACQUIRED COMPANY CANNOT BE CONSTRUED AS A GUARANTEE OF THE SUCCESS OF THE COMPANY.

The Company’s management may in the future become associated with or employed by other companies, which are engaged, or may become engaged, in operations similar to the operations engaged in by the Company. Conflicts of interest between the Company’s officers and/or directors and the Company may arise by reason of such relationships. Management intends to resolve any conflicts with respect to such operations in a manner equitable to the shareholders of the Company, its management, and any of the Company’s affiliates. Officers and all employees are required to sign a proprietary inventions agreement which means that anything that is invented while employed at Natcore is owned by Natcore. Additionally all employees are required annually to complete an outside employment disclosure which allows the registrant to better control if there are any outside interests. Directors are not required to do either and may pursue opportunities independently of the registrant.

All investments in the Company risk the loss of capital. While the Company’s management believes that its experience and relationships will moderate this risk to some degree, no representation is made that the Company’s projects will be successful.

The Company is subject to the possibility of future litigation that may have a significant adverse effect on the Company’s financial condition, operations and plans for expansion.

There are many risks incident to providing the types of services provided by the Company that may give rise to future litigation. Under such circumstances, the Company may be named as a defendant in a lawsuit or regulatory action. The Company may also incur uninsured losses for liabilities which arise in the ordinary course of business, or which are unforeseen. There is no assurance that the Company’s shareholders will not lose their entire investment in the Company as a result of unforeseen litigation.

The Company’s articles, as amended, provide that the Company will, within the limits of capital contributions and retained assets, hold its directors and officers harmless against certain claims arising from Company activities, other than losses or damages incurred by it as a result of its gross negligence, fraud or bad faith. If the Company were called upon to perform under its indemnification agreements, then the portion of its assets expended for such purpose would reduce the amount otherwise available for the implementation of its business plan, or for distributions to its shareholders, if any.

The enforcement of civil liabilities against the Company and its officers and directors may be difficult to obtain.

The Company incorporated under the laws of the Province of British Columbia, Canada. Service of process upon the Company and upon the Company’s directors and officers, who may reside outside the United States, may be difficult to obtain within the United States. Furthermore, some of the Company’s assets and some of the Company’s directors and officers are located outside the United States, any judgment obtained in the United States against the Company or any of the Company’s directors and officers, including one predicated on the civil liability provisions of the U.S. federal securities laws, may not be collectible within the United States.

The institutions with which the Company (directly or indirectly) does business may encounter financial difficulties that impair or would impair the operational capabilities or the capital position of the Company.

The Company must comply with various legal requirements, including requirements imposed by the state and federal securities laws and pension laws. Should any of those laws change over the scheduled term of the Company, the legal requirements to which the Company and its shareholders may be subject could differ materially from current requirements.

The Company may face adverse tax consequences and may be audited by the Internal Revenue Service or the Canada Revenue Agency.

While the Company is advised in tax matters by its accountants, the Internal Revenue Service (the “IRS”) or the Canada Revenue Agency (“CRA”) may not accept the tax positions taken by the Company. As a result, the IRS or CRA could audit the Company’s information and adjustments to the Company’s tax returns may result. Any such adjustment could subject the shareholders to additional tax, interest and penalties, as well as incremental accounting and legal expenses. In addition, an audit of the Company’s tax returns could lead to audits of the individual tax returns of the shareholders, resulting in adjustments and additional tax with respect to non-Company items.

The Company may be subject to regulation by county, state and federal governments, governmental agencies, and regulatory authorities from several different countries. Failure to obtain regulatory approvals or delays in obtaining regulatory approvals by the Company, its collaborators, customers, vendors or service providers would adversely affect the marketing of products and services developed by the Company, and the Company’s ability to generate product and service revenues. Further, there can be no assurance that the Company, its customers, vendors, or service providers will be able to obtain necessary regulatory approvals. Although the Company does not anticipate problems satisfying any of the regulations involved, the Company cannot foresee the possibility of new regulations, which could adversely affect the business of the Company. While the Company anticipates that all regulatory approvals required will be granted, violations by the Company and/or its customers of, and/or non-compliance with, such regulations and approvals may adversely affect the Company’s ability to acquire capital, or adversely affect the Company’s ability to conduct its business as intended.

Local, national and international economic conditions may have a substantial adverse effect on the efforts of the Company. The Company cannot guarantee its anticipated results of operations against the possible eventuality of any of these potential adverse conditions.

The Company operates in the United States but raises funds in Canadian dollars which creates exposure to changes in exchange rates, primarily as between the US dollar and the Canadian dollar. Changes in the exchange rates faced by the Company may have a material adverse impact on its future financial performance. In recent years, the Canadian dollar has dropped in value as against the U.S. dollar and has performed with increased volatility relating to general economic conditions.

The Company plans to obtain comprehensive insurance coverage, including liability, fire and extended coverage, as is customarily obtained for businesses similar to the Company. Certain types of losses of a catastrophic nature, such as losses resulting from floods, tornadoes, thunderstorms and earthquakes, are uninsurable or not economically insurable to the full extent of potential loss. Such Acts of God, work stoppages, regulatory actions or other causes, could interrupt or delay the Company’s development or expansion, and would adversely affect the Company’s business, results of operations, and profitability.

The Company’s business, to date, and for the foreseeable future, will be significantly dependent on the Company’s management team, directors and key consultants, including but not limited to Charles Provini, John C. Calhoun, and Dennis J. Flood. Each of the foregoing has other engagements that compete for their time.

The loss of any one of these officers could have a material adverse effect on the Company. If the Company lost the services of one or more of its executive officers or key employees, it would need to devote substantial resources to finding replacements, and until replacements were found, the Company would be operating without the skills or leadership of such personnel, any of which could have a significant adverse effect on the Company’s business. The Company currently does not carry key-man life insurance policies covering any of these officers.

Any expansion plans undertaken by the Company to increase or expand its operations entail risks, which may negatively impact the profitability of the Company. Consequently, shareholders must assume the risk that (i) such expansion may ultimately involve expenditures of funds beyond the resources available to the Company at that time, and (ii) management of such expanded operations may divert management’s attention and resources away from its existing operations, all of which factors may have a material adverse effect on the Company’s present and prospective business activities. The Company cannot assure its shareholders that its products, procedures or controls will be adequate to support the anticipated growth of its operations.

The Company’s success will depend in part on its ability to protect its proprietary rights and technologies, including, but not limited to, U.S. Patent 7,718,550, U.S. Patent 7,253,014, U.S. Patent 7,682,527, U.S. Patent 7,491,376, U.S. Patent 7,692,218 , U.S. Patent 8,431,818, U.S. Patent 7,999,172, U.S. Patent 8,433,417, U.S.

Patent 8,716,152 and U.S. Patent 9,093,267 . The Company relies on a combination of patents, trademark laws, trade secrets, confidentiality provisions and other contractual provisions to protect its proprietary rights. However, not all of these measures may apply or may afford only limited protection. The Company’s failure to adequately protect its proprietary rights may adversely affect the Company. Despite the Company’s efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of the Company’s services or to obtain and use trade secrets or other information that it regards as proprietary. Based on the nature of its business, it may or may not be able to adequately protect its rights through patent, copyright and trademark laws. The Company’s means of protecting its proprietary rights abroad may not be adequate, and competitors may independently develop similar technologies. The Company may become involved in litigation over proprietary rights. In the event of an adverse result in any future litigation with third parties relating to proprietary rights, the Company could be required to pay substantial damages, including treble damages if the Company is held to have willfully infringed or to expend significant resources to develop non-infringing technology. In addition, litigation frequently involves substantial expenditures and can require significant management attention, even if the Company ultimately prevails. However, there can be no assurance that the Company would be able to successfully resolve such disputes in the future.

The Company may experience operating losses as it develops, produces and distributes its products and services. As a result, the Company may not be able to achieve profitability in a commercially acceptable time frame, if ever.

Natcore is an “emerging growth company” with reduced reporting requirements.

Natcore is an “emerging growth company,” as defined in the JOBS Act. Although the Company has elected not to take advantage of certain reporting exemptions available it, for so long as Natcore remains an “emerging growth company,” it will not be subject to the provision of Section 404(b) of the Sarbanes-Oxley Act, applicable to non-emerging growth companies, that requires that an independent registered public accounting firm provide an attestation report on the effectiveness of the Company’s internal control over financial reporting. This may increase the risk that the Company will fail to detect and remedy any weaknesses or deficiencies in its internal control over financial reporting. In general, these reduced reporting requirements may allow the Company to refrain from disclosing information that investors may find important. It is also possible that shareholders may generally find Natcore’s common shares less attractive due to its status as an “emerging growth company” and its limited disclosures. Any of the foregoing could adversely affect the price and liquidity of the Company’s common shares.

Natcore may take advantage of these disclosure exemptions until it is no longer an “emerging growth company” however it may still take advantage of certain reduced reporting requirements if it remains a small company. The Company will cease to be an “emerging growth company” upon the earliest of:

The demand for solar power products is dependent on volatile market and industry trends that can affect demand for Natcore’s products and negatively impact its revenue.

The global economic downturn that began in the fourth quarter of 2008 highlighted the volatility associated with the solar power industry. The capital-intensive nature of implementation requiring access to capital sources caused an overall reduction in demand for solar power technology. While global markets have stabilized and access to capital has returned the demand for solar power products, the potential for soft demand and the trend of reduced cost of production could again have the effect of an over-supplied market place. The effects of a supply driven market place due to soft demand would be adverse to the Company’s margins and in turn revenues.

In addition, macroeconomic and geopolitical events influence the demand for solar power products. Specifically, currency exchange rates and governmental regulation affect the price of other energy resources like oil, natural gas and coal. A reduction in the price of these traditional energy resources, such as the recent significant decrease in the oil and natural gas markets, could result in a reduction in the demand for alternative energy sources such as solar power; which in turn could reduce the margins of the Company’s products and result in a decrease in revenue.

Unforeseen technological failings that increase the cost of adoption of solar products may inhibit widespread implementation of solar solutions that would result in reduced revenue or the inability for the Company to maintain its profitability.

The recent discovery of hardware failure and technical issues related to solar power equipment that occurred earlier in product life that had been expected could alter the associated cost of implementation of solar power products that could in turn lead to a drop in demand. Historical data is not as readily available for the solar industry as it is for the traditional sources of energy limiting the ability to determine a reliable trend upon which to base future results. Increased costs associated with implementation could lead to the failure of solar power technology being widely adopted resulting in the Company’s inability to sustain revenue growth and profitability.

If third parties claim that the Company’s products infringe their intellectual property rights, the Company may be forced to expend significant financial resources and management time, and operating results would suffer.

The Company’s portfolio of intellectual property is significant to its financial condition and operations. Third parties may claim that the Company’s products and systems infringe their patents or other intellectual property rights. Identifying third-party patent rights can be particularly difficult, especially since patent applications are not published until 18 months after their filing dates. If a competitor were to challenge the Company’s patents, or assert that its products or processes infringe its patent or other intellectual property rights, the Company could incur substantial litigation costs, be forced to design around their patents, pay substantial damages or even be forced to cease operations, any of which could be expensive and/or have an adverse effect on the Company’s operating results. Third-party infringement claims, regardless of their outcome, would not only drain financial resources, but also would divert the time and effort of management, and could result in customers or potential customers deferring or limiting their purchase or use of the affected products or services until resolution of the litigation.

The Company is subject to certification requirements and other regulations. Future more stringent regulations may impair the Company’s ability to market its products.

The Company must obtain product certification from governmental agencies, such as the EPA, to sell certain products in the United States, and must comply with other product certification requirements in other countries. A portion of the Company’s future sales will depend upon sales of solar power products and technologies that are certified to meet existing and future air quality and energy standards. The Company cannot assure that its products will meet these standards. The failure to comply with these certification requirements could result in the recall of the Company’s products, or civil or criminal penalties.

Any new government regulation that affects solar power products and technologies, whether at the foreign, federal, state, or local level, including any regulations relating to installation and service of these systems, may increase the Company’s costs and the price of its systems. As a result, these regulations may have a negative impact on the Company’s revenue and profitability and thereby harm its business, prospects, results of operations, or financial condition.

Changes in tax policies may reduce or eliminate the economic benefits that make the Company’s products attractive to consumers .

In some jurisdictions, such as the United States, governments provide tax benefits for solar cell technologies, including tax credits, rebates and reductions in applicable tax rates. In certain markets of the Company these benefits extend to users of the Company’s products. From time to time, governments change tax policies in ways that create benefits such as those for the Company’s customers. Reductions or eliminations in these benefits may adversely affect the Company’s revenue.

New developments in technology may negatively affect the development or sale of some or all of the Company’s products or make its products obsolete. The Company’s inability to enhance existing products in a timely manner or to develop and introduce new products that incorporate new technologies, conform to increasingly stringent emission standards and performance requirements, and achieve market acceptance in a timely manner could negatively impact the Company’s competitive position. New product development or modification is costly, involves significant research, development, time and expense, and may not necessarily result in the successful commercialization of any new products.

If the Company misses a required performance standard, fails to timely complete, or otherwise fails to adequately perform on a project, the Company may incur a loss on that project which may reduce or eliminate its overall profitability.

The Company may commit to a client that the Company will complete a project by a scheduled date. The Company may also commit that a project, when completed, will achieve specified performance standards. If the project is not completed by the scheduled date or fails to meet required performance standards, the Company may incur additional costs or be held responsible for damages due to late completion or failure to achieve the required performance standards. The uncertainty of the timing of a project can present difficulties in planning the amount of personnel and resources needed for the project. If the project is delayed or canceled, the Company may bear the cost of an underutilized workforce. In addition, performance on projects can be affected by a number of factors beyond its control, including unavoidable delays from the weather conditions, changes in the project scope, unanticipated site conditions or other disruptions. In some cases, should the Company fail to meet the required schedule or performance standards, the Company may also be subject to agreed upon financial damages which are determined by the contract. To the extent that these events occur, the total costs of the project could exceed its estimates or, in some cases, cause a loss which may reduce or eliminate its overall profitability or cause a financial loss.

The Company conducts a portion of its operations through joint venture entities, over which the Company may have limited control.

The Company may partner with its Best of Breed clients or conduct its operations through joint venture entities. As with most joint venture arrangements, differences in views among the joint venture participants may result in delayed decisions or disputes. The Company cannot control the actions of its joint venture partners, and the Company typically has joint and several liability with its joint venture partners under the applicable contracts for joint venture projects. These factors could potentially harm the business and operations of a joint venture and, in turn, the Company’s business and operations.

In conducting the Best of Breed Program, the Company depends on other contractors and subcontractors. If these parties fail to satisfy their obligations to the Company or other parties, or if the Company is unable to maintain these relationships, the Company’s revenue, profitability and growth prospects could be adversely affected.

The Company depends on contractors and subcontractors in conducting the Best of Breed Program. There is a risk that the Company may have disputes with its subcontractors arising from, among other things, the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontractor, or the Company’s failure to extend existing task orders or issue new task orders under a subcontract. In addition, if any of the subcontractors fail to deliver on a timely basis the agreed-upon supplies and/or perform the agreed-upon services, the Company’s ability to fulfill its obligations may be jeopardized.

The Company also relies on relationships with other contractors when it acts as their subcontractor or joint venture partner. The Company’s future revenue and growth prospects could be adversely affected if other contractors eliminate or reduce their subcontracts or joint venture relationships with the Company, or refuses to pay under a contract.

The Company business and operating results could be adversely affected by its inability to accurately estimate the overall risks, revenue or costs on a contract.

The Company may engage in a fixed-price contract which requires the Company to either perform all work under the contract for a specified lump-sum or to perform an estimated number of units of work at an agreed price per unit, with the total payment determined by the actual number of units performed. Fixed-price contracts expose the Company to a number of risks not inherent in cost-plus and time and material contracts, including underestimation of costs, ambiguities in specifications, unforeseen costs or difficulties, problems with new technologies, delays beyond the Company’s control, failures of subcontractors to perform and economic or other changes that may occur during the contract period. Losses under fixed-price construction contracts could be substantial and harm the Company’s results of operations. Under the Company’s cost-plus contracts, some of which are subject to contract ceiling amounts, the Company is reimbursed for allowable costs and fees which may be fixed or performance based. If the Company’s costs exceed the contract ceiling or are not allowable, the Company may not be able to obtain reimbursement for all such costs. Accounting for a fixed-price contract requires judgments relative to assessing the contract’s estimated risks, revenue and costs as well as technical issues. The uncertainties inherent in the estimating process make it possible for actual costs to vary from estimates, or estimates to change, resulting in reductions or reversals of previously recorded revenue and profit. Such variances could be material. Finally, the Company may receive equity or a portion of the revenues generated from a power purchase agreement. The lack of success of the underlying venture or the failure of the client to generate revenue may adversely affect the Company’s business and operating results.

The Company’s services expose it to significant risks of liability, and it may be difficult or more costly to obtain or maintain adequate insurance coverage.

The Company’s services involve significant risks that may substantially exceed the fees the Company derive from its services. The Company’s business activities expose it to potential liability for professional negligence, personal injury and property damage among other things. The Company cannot always predict the magnitude of such potential liabilities. In addition, its ability to perform certain services is dependent on the availability of adequate insurance. The Company may obtain insurance from insurance companies to cover a portion of its potential risks and liabilities subject to specified policy limits, deductibles or coinsurance. It is possible that the Company may not be able to obtain adequate insurance to meet its needs or may have to pay an excessive amount for the insurance coverage the Company desires. In addition, the Company may not be able to acquire any insurance for certain types of business risks.

Authorized capital consists of an unlimited number of shares of one class designated as common shares

The Company’s authorized capital consists of an unlimited number of shares of one class designated as common shares. The directors may create any class or series of shares by resolution but may not make any modification to the provisions attaching to the Company’s common shares without the affirmative vote of two- thirds of the votes cast by the holders of the common shares. The Company’s common shares do not have pre-emptive rights to purchase additional shares. Shareholders should be aware that the exercise of warrants described herein will dilute the value of current holdings.

Volatility of the market price of the Company’s common shares could adversely affect its shareholders and the Company.

The market price of the Company’s common shares could be highly volatile and could be subject to wide fluctuations in response to numerous factors, including the following:

The Company has not paid dividends in the past and does not expect to pay dividends in the future. Any return on an investment could be limited to the value of the common stock.

The Company has never paid cash dividends on its common shares and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends depends on the financial condition of the Company, with other business and economic factors influencing the decision by the board of directors in determining the issuance of a dividend. If dividends are not issued, the Company’s common shares may be considered less valuable because a return on an investment will only occur if the Company’s stock price appreciates.

Stockholder ownership interest in the Company may be diluted as a result of future financings or additional acquisitions.

The Company may seek to raise funds from time to time in public or private issuances of equity in the near future or over the longer term. Sales of the Company’s securities offered through future equity offerings may result in substantial dilution to the interests of the Company’s current shareholders. The sale of a substantial number of securities to investors, or anticipation of such sales, could make it more difficult for the Company to sell equity or equity-related securities in the future at a time and at a price that the Company might otherwise wish to effect sales. In addition, the Company has issued shares of its common stock for various acquisitions in the past and may do so in the future, which may also result in substantial dilution to the interests of the Company’s current shareholders.

Shareholders may experience dilution as a result of future purchases exercised on outstanding options and warrants.

As of December 31, 2017, the Company had 6,105,000 options outstanding. Each option entitles the holder to purchase one additional common share at exercise prices ranging from CDN$0.17 to CDN$1.08 and expiring on dates ranging from January 4, 2018 to December September 20, 2022, some of which have expired unexercised as of the date hereof.

As of December 31, 2017, the Company had 36,003,203 warrants outstanding. Each warrant entitles the holder to purchase one additional common share at an exercise prices ranging from CDN$0.12 to CDN$0.95 and US$0.62 and with expiration dates ranging from January 21, 2018 to December 27, 2020. To the extent these options or warrants are ultimately exercised, shareholders will sustain future dilution.

THE COMPANY CANNOT PREDICT WHETHER IT WILL SUCCESSFULLY EFFECTUATE ITS CURRENT BUSINESS PLAN. EACH SHAREHOLDER IS ENCOURAGED TO CAREFULLY ANALYZE THE RISKS AND MERITS OF AN INVESTMENT IN THE COMPANY’S COMMON STOCK AND SHOULD TAKE INTO CONSIDERATION WHEN MAKING SUCH ANALYSIS, AMONG OTHERS, THE RISK FACTORS DISCUSSED ABOVE.

Natcore Technology Inc. (the “Company”) was incorporated under the British Columbia Business Corporations Act on August 9, 2007. The Company’s common shares are listed on the TSX Venture Exchange (the “Exchange”) under the symbol NXT. Effective May 26, 2015, the Company became a fully-reporting issuer in the United States. The Company develops and owns technology for the manufacturing of solar cells.

The Company’s head office address is 189 North Water Street, Suite 700, Rochester, NY 14604-1163. The Company’s registered office is 2080 - 777 Hornby Street, Vancouver British Columbia V6Z 1S4.

These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. As of December 31, 2017 the Company has had recurring losses from operations and a cumulative deficit of $23,213,638. The Company’s continuation as a going concern is dependent upon its ability to attain profitable operations and generate funds there from and/or raise equity capital or borrowings sufficient to meet current and future obligations. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. Management intends to finance operating costs over the next twelve months with existing cash resources and the private placement of common shares.

These consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRB") issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

The consolidated financial statements were authorized for issue by the Board of Directors on May 2, 2018.

The consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable. The consolidated financial statements are presented in United States dollars unless otherwise noted.

The preparation of consolidated financial statements in accordance with IFRS requires the Company to make estimates and assumptions concerning the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.

Estimates and assumptions where there is significant risk of material adjustments to assets and liabilities in future accounting periods include the useful lives of equipment, impairment considerations for equipment and intangible assets, determination of fair value for stock-based compensation and other share-based payments, valuations and assumptions used to determine deferred income taxes and the fair value of financial instruments.

The functional currency of each of the Company’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in United States dollars which is the functional currency of the Company and its subsidiaries.

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the statement of comprehensive loss in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive loss in the statement of comprehensive loss to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive loss. Where the non-monetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss.

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following have been demonstrated:

The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditure is recognized in loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

At December 31, 2017 and 2016, the Company has not recognized any internally-generated intangible assets.

The Company operates a stock option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the share-based payment reserve. The fair value of options is determined using the Black–Scholes Option Pricing Model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

The Company classifies its financial instruments in the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale and financial liabilities. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at initial recognition.

Financial assets are classified at fair value through profit or loss when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortized cost. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets.

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortized cost. Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period.

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not suitable to be classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments and are subsequently measured at fair value. These are included in current assets. Unrealized gains and losses are recognized in other comprehensive loss, except for impairment losses and foreign exchange gains and losses.

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortized cost. Derivative financial liabilities are classified at fair value through profit and loss and are subsequently measured at fair value with changes in carrying value being included in profit or loss.

Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the Company commits to purchase the asset.

Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.

At each reporting date, the Company assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant and prolonged decline in the value of the instrument is considered to determine whether impairment has arisen.

The carrying amount of the Company’s long-lived assets (which include equipment and intangible assets) is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the statement of comprehensive loss.

The recoverable amount of assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.

Cash and cash equivalents include cash on hand, deposits held at call with banks and other short-term highly liquid investments, such as guaranteed investment certificates with original maturities of three months or less. Guaranteed investment certificates are investments with Canadian banks that are the equivalent of a certificate of deposit.

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income.

Current income tax relating to items recognized directly in other comprehensive loss or equity is recognized in other comprehensive loss or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income tax is provided using the asset and liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of comprehensive loss during the financial period in which they are incurred.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in profit or loss.

Depreciation and amortization are calculated on a straight-line method to write off the cost of the assets to their residual values over their estimated useful lives.

Certain expenses have been reclassified to conform to the presentation in the current year.

This new standard replaces IAS 17 “Leases” and the related interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting is not substantially changed. The standard is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted for entities that have adopted IFRS 15.

The Company has not early adopted this new standard and is currently assessing the impact that these standards will have on its consolidated financial statements.

Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.

The fair values of these warrants were estimated using the Black-Scholes Option Pricing Model using the following assumptions.

The fair values of these warrants as of December 31, 2017 were estimated using the Black-Scholes Option Pricing Model using the following inputs:

The fair values of these warrants as of December 31, 2016 were estimated using the Black-Scholes Option Pricing Model using the following inputs:

At December 31, 2017 and 2016, there were 78,163,435 and 64,866,802, respectively, issued and fully paid common shares.

In February 2016, the Company completed a non-brokered private placement and issued 273,058 units at a price of CDN$0.36 per unit for gross proceeds of $70,908 (CDN$98,301). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.55 per share for a period of three years from the date of closing. The Company had received subscriptions of $31,102 at December 31, 2015 that related to this private placement. On issue the fair value of the warrants was determined to be $26,464 and included in derivative liability (Note 8).

In March 2016, the Company completed a non-brokered private placement and issued 2,244,497 units at a price of CDN$0.36 per unit for gross proceeds of $622,166 (CDN$808,019). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.55 per share for a period of three years from the date of closing. On issue the fair value of the warrants was determined to be $489,252 and included in derivative liability (Note 8). The Company paid finders’ fees of $6,150 and incurred other share issue costs of $3,276. The Company also issued 23,450 finders’ warrants with a fair value of $5,112 in connection with this private placement exercisable at a price of CAD$0.55 per share for a period of three years from the date of closing.

In June 2016, the Company completed a non-brokered private placement and issued 1,000,000 units at a price of CDN$0.40 per unit for gross proceeds of $305,421 (CDN$400,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.55 per share for a period of three years from the date of closing. On issue the fair value of the warrants was determined to be $167,222 and included in derivative liability (Note 8). The Company paid finders’ fees of $10,000. The Company also issued 70,000 finders’ warrants with a fair value of $10,940 in connection with this private placement exercisable at a price of CAD$0.55 per share for a period of three years from the date of closing.

In July 2016, the Company completed a non-brokered private placement and issued 1,000,000 units at a price of CDN$0.40 per unit for gross proceeds of $303,630 (CDN$400,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.55 per share for a period of three years from the date of closing. The Company also issued 70,000 finders’ warrants with a fair value of $9,841 in connection with this private placement exercisable at a price of CAD$0.55 per share for a period of three years from the date of closing.

In September 2016, the Company completed a non-brokered private placement and issued 650,000 units at a price of CDN$0.36 per unit for gross proceeds of $177,048 (CDN$234,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.55 per share for a period of three years from the date of closing. The Company also issued 45,500 finders’ warrants with a fair value of $5,333 in connection with this private placement exercisable at a price of CAD$0.55 per share for a period of three years from the date of closing.

In November 2016, the Company completed a non-brokered private placement and issued 1,427,500 units at a price of CDN$0.23 per unit for gross proceeds of $244,966 (CDN$328,325). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.30 per share for a period of three years from the date of closing. The Company also issued 70,000 finders’ warrants with a fair value of $7,801 in connection with this private placement exercisable at a price of CAD$0.30 per share for a period of three years from the date of closing.

In December 2016, the Company completed a non-brokered private placement and issued 1,500,000 units at a price of CDN$0.21 per unit for gross proceeds of $238,373 (CDN$315,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.30 per share for a period of three years from the date of closing. The Company also issued 70,000 finders’ warrants with a fair value of $5,569 in connection with this private placement exercisable at a price of CAD$0.30 per share for a period of three years from the date of closing.

For the year ended December 31, 2016, the Company determined the fair value at the time of issuance of the warrants included in the derivative liability and the finders’ warrants using the Black-Scholes Option Pricing Model using the following inputs:

In January 2017, the Company completed a non-brokered private placement and issued 1,021,800 units at a price of CDN$0.21 per unit for gross proceeds of $162,030 (CDN$214,578). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.25 per share for a period of three years from the date of closing. The Company also issued 70,000 finders’ warrants with a fair value of $7,139 in connection with this private placement exercisable at a price of CAD$0.25 per share for a period of three years from the date of closing.

In February 2017, the Company completed a non-brokered private placement and issued 650,000 units at a price of CDN$0.34 per unit for gross proceeds of $169,195 (CDN$221,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.40 per share for a period of three years from the date of closing. The Company also issued 45,500 finders’ warrants with a fair value of $4,894 in connection with this private placement exercisable at a price of CAD$0.40 per share for a period of three years from the date of closing.

In March 2017, the Company completed a non-brokered private placement and issued 900,000 units at a price of CDN$0.19 per unit for gross proceeds of $128,077 (CDN$171,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.25 per share for a period of three years from the date of closing. The Company also issued 63,000 finders’ warrants with a fair value of $5,714 in connection with this private placement exercisable at a price of CAD$0.25 per share for a period of three years from the date of closing.

In April 2017, the Company completed a non-brokered private placement and issued 1,030,000 units at a price of CDN$0.19 per unit for gross proceeds of $146,186 (CDN$195,700). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.25 per share for a period of three years from the date of closing. The Company also issued 72,100 finders’ warrants with a fair value of $4,543 in connection with this private placement exercisable at a price of CAD$0.25 per share for a period of three years from the date of closing.

In May 2017, the Company completed a non-brokered private placement and issued 500,000 units at a price of CDN$0.21 per unit for gross proceeds of $76,603 (CDN$105,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.27 per share for a period of three years from the date of closing. The Company also issued 35,000 finders’ warrants with a fair value of $3,414 in connection with this private placement exercisable at a price of CAD$0.27 per share for a period of three years from the date of closing.

In June 2017, the Company completed a non-brokered private placement and issued 1,250,000 units at a price of CDN$0.19 per unit for gross proceeds of $179,955 (CDN$237,500). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.24 per share for a period of three years from the date of closing. The Company also issued 87,500 finders’ warrants with a fair value of $6,505 in connection with this private placement exercisable at a price of CAD$0.24 per share for a period of three years from the date of closing.

In July 2017, the Company completed a non-brokered private placement and issued 650,000 and 900,000 units at a price of CDN$0.19 per unit for gross proceeds of $95,565 (CDN$123,500) and $136,732 (CDN$171,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.24 per share for a period of three years from the date of closing. The Company also issued 45,500 and 63,000 finders’ warrants with a fair value of $3,472 and $4,260 in connection with this private placement exercisable at a price of CAD$0.24 per share for a period of three years from the date of closing.

In August 2017, the Company completed a non-brokered private placement and issued 1,000,000 units at a price of CDN$0.15 per unit for gross proceeds of $118,007 (CDN$150,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.19 per share for a period of three years from the date of closing. The Company also issued 70,000 finders’ warrants with a fair value of $5,192 in connection with this private placement exercisable at a price of CAD$0.19 per share for a period of three years from the date of closing

In September 2017, the Company completed a non-brokered private placement and issued 500,000 units at a price of CDN$0.15 per unit for gross proceeds of $61,687 (CDN$75,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.19 per share for a period of three years from the date of closing. The Company also issued 35,000 finders’ warrants with a fair value of $1,898 in connection with this private placement exercisable at a price of CAD$0.24 per share for a period of three years from the date of closing.

In October 2017, the Company completed a non-brokered private placement and issued 1,250,000 units at a price of CDN$0.12 per unit for gross proceeds of $119,736 (CDN$150,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.15 per share for a period of three years from the date of closing. The Company also issued 87,500 finders’ warrants with a fair value of $3,392 in connection with this private placement exercisable at a price of CAD$0.15 per share for a period of three years from the date of closing.

In November 2017, the Company completed a non-brokered private placement and issued 1,449,833 units at a price of CDN$0.12 per unit for gross proceeds of $136,996 (CDN$173,980). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.15 per share for a period of three years from the date of closing. The Company also issued 87,500 finders’ warrants with a fair value of $2,913 in connection with this private placement exercisable at a price of CAD$0.15 per share for a period of three years from the date of closing.

In December 2017, the Company completed a non-brokered private placement and issued 1,550,000 units at a price of CDN$0.10 per unit for gross proceeds of $114,688 (CDN$147,250). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.12 per share for a period of three years from the date of closing. The Company also issued 108,500 finders’ warrants with a fair value of $3,031 in connection with this private placement exercisable at a price of CAD$0.12 per share for a period of three years from the date of closing.

The Company incurred cash shares issuance costs of $174,721 in connection with the private placements completed during the year ended December 31, 2017.

For the year ended December 31, 2017, the Company determined the fair value at the time of issuance of the warrants included in the derivative liability and the finders’ warrants using the Black-Scholes Option Pricing Model using the following inputs:

In July 2016, the Company issued 400,000 shares of common stock for professional services. The fair value of the shares was $124,000

In February 2017, the Company issued 140,000 shares for services at a value of $0.23 per share for a total cost of $32,155.

Diluted loss per share did not include the effect of stock options and warrants as the effect would be anti-dilutive.

The Company has adopted an incentive stock option plan, which provides that the Board of Directors of the Company may from time to time, at its discretion, and in accordance with the Exchange requirements, grant to directors, officers, employees and technical consultants to the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 6,779,255 common shares. Such options will be exercisable for a period of up to 10 years from the date of grant. In connection with the foregoing, the number of common shares reserved for issuance to any one optionee will not exceed five percent (5%) of the issued and outstanding common shares and the number of common shares reserved for issuance to all technical consultants will not exceed two percent (2%) of the issued and outstanding common shares. Options may be exercised no later than 90 days following cessation of the optionee’s position with the Company or 30 days following cessation of an optionee conducting investor relations activities’ position.

Stock-based compensation expense has been calculated using the Black-Scholes option pricing model. The expected life of the options has been estimated to be the contractual term of the option given the limited history of early exercise. Future volatility has been determined based on historical volatility for a period equivalent to the expected life of the option.

During the years ended December 31, 2017 and 2016, the Company recorded stock-based compensation expense of $67,599 and $869,130, respectively.

On January 31, 2016, the Company granted 1,975,000 stock options to employees. The options vested immediately. The options are exercisable at CDN$0.40 and expire January 13, 2021. The options had a grant date fair value of $395,116 (CDN$562,580) determined using the Black-Scholes Option Pricing Model with the following assumptions: Risk free rate of 0.92%; Expected life of 5.00 years; Volatility of 94%; and a Dividend yield of 0%.

On February 15, 2016, the Company granted 120,000 stock options to an employee. The options vest accordingly: 80,000 after 6 months, and 40,000 after 1 year. The options are exercisable at CDN$0.51 and expire February 15, 2021. The options had a grant date fair value of $31,489 (CDN$43,622) determined using the Black-Scholes Option Pricing Model with the following assumptions: Risk free rate of 0.92%; Expected life of 5.00 years; Volatility of 94%; and a Dividend yield of 0%.

On December 9, 2016, the Company granted 1,830,000 stock options to employees. The options vested immediately. The options are exercisable at CDN$0.20 and expire December 9, 2021. The options had a grant date fair value of $197,874 (CDN$260,531) determined using the Black-Scholes Option Pricing Model with the following assumptions: Risk free rate of 1.08%; Expected life of 5.00 years; Volatility of 93%; and a Dividend yield of 0%.

On December 30, 2016, the Company granted 1,830,000 stock options to employees. The options vested immediately. The options are exercisable at CDN$0.18 and expire December 30, 2021. The options had a grant date fair value of $54,561 (CDN$73,250) determined using the Black-Scholes Option Pricing Model with the following assumptions: Risk free rate of 1.11%; Expected life of 5.00 years; Volatility of 94%; and a Dividend yield of 0%.

In January 2017, an option holder exercised 130,000 options for proceeds of $39,610 (CDN$52,000).

On June 22, 2017, the Company granted 120,000 stock options to employees. The options vested immediately. The options are exercisable at CDN$0.22 and expire June 22, 2022. The options had a granted date fair value of $13,018 (CDN$17,238) determined using the Black-Scholes Option Pricing Model with the following assumptions: Risk free rate of 0.65%; Expected life of 5.00 years; Volatility of 98%; and a Dividend yield of 0%.

On September 20, 2017, the Company granted 200,000 stock options to employees. The options vested immediately. The options are exercisable at CDN$0.17 and expire September 20, 2022. The options had a grant date fair value of $13,129 (CDN$16,369) determined using the Black-Scholes Option Pricing Model with the following assumptions: Risk free rate of 0.65%; Expected life of 5.00 years; Volatility of 98%; and a Dividend yield of 0%.

The changes in options during the years ended December 31, 2017 and 2016 are as follows:

The weighted average remaining life of the warrants outstanding as at December 31, 2017 is 1.56 years.

The share-based payment reserve records the fair value of options and warrants recorded in accordance with IFRS 2 “Share-based payments” until such time that the stock options or warrants are exercised, at which time the corresponding amount will be transferred to share capital.

The fair value of the Company’s financial assets and liabilities approximates the carrying amount.

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

Financial liabilities measured at fair value at December 31, 2017 and 2016 consisted of the derivative financial liability, which is measured using level 3 inputs.

The fair value of the derivative liability is determined by the Black-Scholes option pricing model using the historical volatility as an estimate of future volatility. At December 31, 2017 if the volatility used was increased by 10% the impact would be an increase to the derivative liability of $82,240, with a corresponding decrease to comprehensive loss.

As of December 31, 2017 and December 31, 2016, $598,285 and $318,685, respectively, owed to directors, officers, and companies controlled by directors has been included in trade payables and accrued liabilities.

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash, and cash equivalents. The majority of cash is deposited in bank accounts held with major banks in Canada and the United States. As most of the Company’s cash is held by two banks there is a concentration of credit risk. This risk is managed by using major banks that are high credit quality financial institutions as determined by rating agencies. The Company’s secondary exposure to risk is on its receivables. The risk is considered to be minimal.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents.

Historically, the Company's sole source of funding has been the issuance of equity securities for cash, primarily through private placements. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.

The following is an analysis of the contractual maturities of the Company’s non-derivative financial liabilities as at December 31, 2017:

Based on the above net exposures, a 1% change in the Canadian dollar to United States dollar exchange rate would impact the Company’s net loss by $2,321 and $1,188 at December 31, 2017 and December 31, 2016, respectively.

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its cash equivalents as these instruments have original maturities of three months or less and are therefore exposed to interest rate fluctuations on renewal. A 1% change in market interest rates would not have a significant impact on the Company’s net loss.

The Company has an agreement (the “Employment Agreement”) dated October 1, 2007, and amended July 31, 2008, with an officer of the Company under which the Company pays a fee for employee services at a base salary of $220,000 per annum. On April 30, 2010, the Board of Directors passed a resolution to increase this to $250,000 per annum and on May 13, 2011 passed a resolution to increase this to $275,000 per annum. The employee is entitled to receive options under the terms and conditions of the Company’s stock option plan. The employee will serve as the President and Chief Executive Officer of the Company. On April 5, 2012, the employment agreement was extended for an additional two years under the same terms. On April 5, 2014, the employment agreement was extended for an additional three years under the same terms. On April 5, 2017, the employment agreement was extended for an additional three years under the same terms.

Pursuant to the Employment Agreement, the Company has committed to granting 500,000 stock options based on the Company achieving certain consolidated net revenue targets. The exercise price and term of the options will be set at time the targets are met.

The employee has the right, upon 30-days’ notice, to terminate the Employment Agreement. The Company may terminate the Employment Agreement on 10-days’ notice if for cause or on 60 days’ notice if without cause. Should the Company terminate the contract without cause, it is obligated to pay the employee an amount equal to three month’s base salary.

In 2004, the Company entered into a License Agreement with a university under which the university is entitled to receive: (i) 2% of the Company’s adjusted gross sales as defined in the License Agreement, and (ii) 2% of the adjusted gross sales of any sub licensee as defined in the License Agreement. The License Agreement gives the Company an exclusive license to a certain United States patent and the related technology for low temperature growth of inorganic materials from solution using catalyzed growth and re-growth.

On June 1, 2013, the Company entered into a new two-year lease for its research and development facility in Rochester, New York. The Company will pay a base rent of $103,596 per year in monthly installments of $8,633. On June 26, 2015, the Company extended the lease from July 1, 2015 to June 30, 2017 at a base rent of $105,212 per year in monthly installments of $8,768. This lease was extended for another three years expiring on June 30, 2020. Base annual rent for the years ending June 30, 2018, 2019, and 2020 is $108,312, $109,474, and $110,637, respectively.

On December 9, 2011, the Company entered into a Patent License Agreement to use certain licensed patents. The Company is required to pay an annual fee of $25,000 for as long as the Company uses the patents.

The Company has the following deductible temporary difference for which no deferred tax asset has been recognized and that can be carried forward indefinitely.

The Canadian non-capital losses expire between 2027 and 2037. The US tax losses may be carried forward indefinitely. No deferred tax asset has been recognized as there is insufficient persuasive evidence that the Company will have sufficient taxable income in the future to utilize the tax losses.

In January 2018, the Company granted 1,354,000 stock options to employees and officers with an exercise price of CDN$0.095 per share for a period of 5 years.

In January 2018, the Company completed a non-brokered private placement and issued 1,500,000 units at a price of CDN$0.09 per unit for gross proceeds of $109,221 (CDN$135,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.11 per share for a period of three years from the date of closing. The Company also issued 105,000 finders warrants with an exercise price of CDN$0.11.

In February 2018, the Company completed a non-brokered private placement and issued 1,250,000 units at a price of CDN$0.07 per unit for gross proceeds of $68,632 (CDN$87,500). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.09 per share for a period of three years from the date of closing. The Company also issued 87,500 finders warrants with an exercise price of CDN$0.09.

In March 2018, the Company extended the expiry date of an aggregate of 1,597,050 outstanding share purchase warrants. The warrants were originally had expiry dates of April 14, 2018 and April 27, 2018. The expiry date has been extended by two years.

In April 2018, the Company completed a non-brokered private placement and issued 7,000,000 units at a price of CDN$0.14 per unit for gross proceeds of $762,224 (CDN$980,000). Each unit comprised one common share and one purchase warrant, with each warrant exercisable at a price of CDN$0.21 per share for a period of three years from the date of closing. The Company also issued 226,065 finders’ warrants with an exercise price of CDN$0.21.

Event	Target Date	Cost
Research and development for the Company’s technologies, including identifying additional applications	Ongoing	Not known
Additional patent and other intellectual property applications	Ongoing	Not known

Percentage Owned ¹
	Jurisdiction of Incorporation	December 30, 2017	December 30, 2016	December 30, 2015
Natcore Technology, Inc.	Delaware, United States	100%	100%	100%
Vanguard Solar Inc.	Delaware, United States	100%	100%	100%
Netcore Asia Technology, Limited	Hong Kong	100%	100%	100%
NewCyte, Inc.	Delaware, United States	100%	100%	100%
Natcore Technology Zhuzhou Ltd.	People’s Republic of China	55%	55%	55%

	Years Ended December 31,
Activity	2017 (Audited)	2016 (Audited)
Net cash used in operating activities	(1,545,191)	(2,346,474)
Net cash used in investigating activities	(1,548)	(3,542)
Net cash used in financing activities	1,579,878	1,851,747
Net increase (decrease) in cash	33,139	(498,269)
Cash at the beginning of the period	23,252	521,521
Cash at the end of the period	56,391	23,252

	Years Ended December 31,
Activity	2016 (Audited)	2015 (Audited)
Net cash used in operating activities	(2,346,474)	(2,588,345)
Net cash used in investigating activities	(3,542)	(27,185)
Net cash used in financing activities	1,851,747	2,588,664
Net increase (decrease) in cash	(498,269)	(26,866)
Cash at the beginning of the period	521,521	548,387
Cash at the end of the period	23,252	521,521

	Total ($)	Less than 1 year	1-3 years	> 5 years
Contractual Obligations Operating lease	328,423	108,312	109,474	110,637
Contract payment obligations	440,000	220,000	220,000	-

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Year Ended 31,
	2017	2016	Variance
Expenses
Consulting	132,936	124,652	8,284
Depreciation and amortization	75,272	146,946	(71,674)
Filing fees	26,278	45,172	(18,894)
Foreign exchange (gain	1,457	16,457	(15,000)
Interest and bank charges	7,804	2,698	5,106
Marketing	76,582	341,104	(264,522)
Office and miscellaneous	191,766	201,736	(9,970)
Professional fees	81,589	219,016	(137,427)
Research and development	861,947	1,137,422	(275,475)
Stock-based compensation	67,599	869,130	(801,531)
Travel	22,231	37,472	(15,241)
Wages and salaries	615,331	763,223	(147,892)
	2,160,792	3,905,028	(1,744,236)
Other Income (Expenses)
Fair value adjustment on warrants	885,673	1,880,587	(994,914)
Other income	123	1,932	(1,809)
Interest income	-	809	(809)
	885,796	1,883,328	(997,532)
NET INCOME LOSS	(1,274,996)	(2,021,700)	746,704

Name and Jurisdiction of Residence	Current Positions and Offices Held	Principal Occupations During Last Five Years	Date of Appointment as a Director or Officer	Number of Common Shares ⁽¹⁾
Charles Provini Florida, USA	Chief Executive Officer, President, Director	President and Chief Executive Officer of the Company and its predecessors from January 2003 to present; President of C.R. Provini & Co. Inc., a private consulting firm from July 1996 to present.	May 8, 2009	1,198,000
Brien Lundin Louisiana, USA	Director and Chairman	President of Jeffereon Direct Inc. (private consulting company) from November 2003 to present	May 8, 2009, as a director and September 30, 2013 as chairman	3,006,223 ⁽²⁾
John Calhoun Louisiana, USA	Director	President of Fort Hill Resources LLC (private consulting company) from December 1997 to present	May 8, 2009	640,900
Dennis Flood Ohio, USA	Chief Technology Officer	Chief Technology Officer for the Company from August 2010 to Present; President and CEO of North Coast Initiatives, Ltd. from May 2001 to Present (a private consulting firm providing management and technical services to photovoltaic (PV) energy conversion industry)	August 17, 2010	960,000 ⁽³⁾
Richard Childs New Jersey, USA	Chief Financial Officer	Self-employed (forensic accounting practice) from 2001 to present;	November 5, 2015	Nil
John Meekison ⁽⁴⁾ British Columbia, Canada	Former Director	Chief Financial Officer, iCo Therapeutics Inc., a biotech company developing drugs for eye diseases, March 2005 to present.	August 9, 2007	10,000 ⁽⁵⁾
Shauna Hartman ⁽⁶⁾ British Columbia, Canada	Former Corporate Secretary ⁶	Solicitor at Armstrong Simpson from 2003 to present.	May 8, 2009	Nil

Notes:
(1)	Does not include options or warrants held by directors and officers of the Company.
(2)	This figure includes 1,906,223 shares held directly by Mr. Lundin and 1,100,000 shares held by Jefferson Financial Inc., which Mr. Lundin has discretionary voting and investment authority over securities held by Jefferson Financial Inc.
(3)	These shares are held by North Coast Initiatives Ltd., which Mr. Flood has discretionary voting and investment authority over securities held by North Coast Initiatives Ltd.
(4)	Mr. Meekison resigned on May 5, 2017.
(5)	These shares are held indirectly through Mr. Meekison’s spouse, Tanya Nundahl.
(6)	Ms. Hartman resigned on March 1, 2017.

Years Ended December 31, 2017, 2016, 2015, 2014, and 2013
Name and Principal Position	Period Ended Dec. 31	Salary ($)	Share- based awards ($)	Option- based awards ($)	Annual incentive plans ($)	Long- term incentive plans ($)	Pensions value ($)	All other compensation ($)	Total Compensation
Charles Provini President/Chief Executive Officer	2017	218,284	Nil	Nil	Nil	Nil	Nil	60,000	278,284
	2016	275,000	Nil	65,588	Nil	Nil	Nil	60,000	400,588
	2015	275,000	Nil	102,000	Nil	Nil	Nil	60,000	437,000
	2014	275,000	Nil	Nil	Nil	Nil	Nil	60,000	335,000
	2013	275,000	Nil	Nil	Nil	Nil	Nil	60,000	335,000
Richard Childs Chief Financial Officer	2017	Nil	Nil	Nil	Nil	Nil	Nil	48,000	48,000
	2016	Nil	Nil	Nil	Nil	Nil	Nil	48,000	48,000
	2015	Nil	Nil	Nil	Nil	Nil	Nil	6,000	6,000
	2014	Nil	Nil	Nil	Nil	Nil	Nil	3,000	3,000
	2013	Nil	Nil	Nil	Nil	Nil	Nil	10,000	10,000
Brian Zucker Former Chief Financial Officer	2017	40,900	Nil	Nil	Nil	Nil	Nil	Nil	40,900
	2016	48,000	Nil	9,404	Nil	Nil	Nil	Nil	57,404
	2015	48,000	Nil	Nil	Nil	Nil	Nil	Nil	48,000
	2014	48,000	Nil	18,300	Nil	Nil	Nil	Nil	66,300
	2013	48,000	12,450	Nil	Nil	Nil	Nil	Nil	60,450
	2012	48,000	Nil	Nil	Nil	Nil	Nil	Nil	48,000
John Meekison Former Director	2017	Nil	Nil	Nil	Nil	Nil	Nil	Nil	Nil
	2016	Nil	Nil	65,588	Nil	Nil	Nil	Nil	65,588
	2015	Nil	Nil	102,000	Nil	Nil	Nil	40,000	142,000
	2014	Nil	Nil	Nil	Nil	Nil	Nil	40,000	48,000
	2013	Nil	Nil	Nil	Nil	Nil	Nil	28,000	28,000
Dennis Flood Chief Technology Officer	2017	43,273	Nil	Nil	Nil	Nil	Nil	Nil	43,273
	2016	82,500	Nil	Nil	Nil	Nil	Nil	Nil	90,823
	2015	82,500	Nil	Nil	Nil	Nil	Nil	Nil	142,000
	2014	165,000	Nil	Nil	Nil	Nil	Nil	Nil	48,000
	2013	165,000	Nil	Nil	Nil	Nil	Nil	Nil	28,000

Option-Based Awards				Share-Based Awards
Name and Principal Position	Number of Securities Underlying Unexercised Options (#)	Option Exercise Price (CDN$)	Option Expiration Date	Value of Unexercised In-the- Money Options (CDN$)	Number of Shares or Units of Shares That have Not Vested (#)	Market or Payout Value of Share- Based Awards That Have Not Vested (CDN$)
Charles Provini President/Chief Executive Officer	300,000	0.20	December 9, 2021	Nil	Nil	Nil
	350,000	0.40	January 13, 2021	Nil	Nil	Nil
	300,000	0.58	April 30, 2010	Nil	Nil	Nil
Brian Zucker Former Chief Financial Officer	90,000	0.20	December 9, 2021	Nil	Nil	Nil
	20,000	0.80	January 4, 2018
	10,000	1.08	January, 2019
	10,000	0.75	December 17, 2019
	10,000	0.40	January 13, 2021
John Meekison Former Director	300,000	0.20	December 9, 2021	Nil	Nil	Nil
	286,500	0.58	April 30, 2020
	195,000	0.40	January 13, 2021
Dennis Flood Chief Technology Officer	90,000	0.20	December 9, 2021	Nil	Nil	Nil

Name and Principal Position	Value of Unexercised In- the-Money Options (CDN$)	Number of Shares or Units of Shares That have Not Vested (#)	Market or Payout Value of Share-Based Awards That Have Not Vested (CDN$)
Charles Provini	Nil	Nil	Nil
President/Chief Executive Officer
Richard Childs	Nil	Nil	Nil
Chief Financial Officer
John Meekison	Nil	Nil	Nil
Former Director
Dennis Flood	Nil	Nil	Nil
Chief Technology Officer

Name and Principal Position	Securities Acquired on Exercise (#)	Exercise Price ($)	Date of Exercise (m/d/y)	Aggregate Value Realized ($)
Charles Provini	Nil	N/A	N/A	Nil
President/Chief Executive Officer
Richard Childs	Nil	N/A	N/A	Nil
Chief Financial Officer
John Meekison	Nil	N/A	N/A	Nil
Former Director
Dennis Flood	Nil	N/A	N/A	Nil
Chief Technology Officer

Name and Principal Position	Date of Grant (m/d/y)	Number of Option-Based Awards Granted ($)	Exercise Price ($)	Expiry Date (m/d/y)
Charles Provini	N/A	Nil	N/A	N/A
President/Chief Executive Officer
Richard Childs	N/A	Nil	N/A	N/A
Chief Financial Officer
John Meekison	N/A	Nil	N/A	N/A
Former Director
Dennis Flood	N/A	Nil	N/A	N/A
Chief Technology Officer

Name	Fees Earned ($)	Share- Based Awards ($)	Option- Based Awards ($)	Non-Equity Incentive Plan Compensation ($)	Pensions Value ($)	All Other Compensation ($)	Total Compensation
John Calhoun	Nil	Nil	Nil	Nil	Nil	Nil	Nil
Brien Lundin	Nil	Nil	Nil	Nil	Nil	Nil	Nil

Option-Based Awards				Share-Based Awards
Name and Principal Position	Number of Securities Underlying Unexercised Options (#)	Option Exercise Price (CDN$)	Option Expiration Date	Value of Unexercised In-the- Money Options (CDN$)	Number of Shares or Units of Shares That have Not Vested (#)	Market or Payout Value of Share- Based Awards That Have Not Vested (CDN$)
John Calhoun	Nil	N/A	N/A	Nil	Nil	Nil
Brien Lundin	Nil	N/A	N/A	Nil	Nil	Nil

Name	Number of securities to be issued upon exercise of outstanding options, warrants, and rights (#)	Weighted-average exercise price of outstanding options, warrants and rights ($)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	6,105,000	CAD$0.42	8,677,720
Equity compensation plans not approved by security holders	N/A	N/A	N/A
TOTAL	6,105,000	CAD$0.42	8,677,720

Name	Option-based awards – Value vested during the year ($)	Share-based awards – Value vested during the year ($)	Non-equity incentive plan compensation – Value earned during the year ($)
John Calhoun	Nil	Nil	Nil
Brien Lundin	Nil	Nil	Nil

Name	Securities Acquire on Exercise (#)	Exercise Price ($)	Date of Exercise (m/d/y/)	Aggregate Value Realized ($)
John Calhoun	Nil	N/A	N/A	Nil
Brien Lundin	Nil	N/A	N/A	Nil

Name	Date of Grant (m/d/y)	Number of Option-Based Awards Granted (#)	Exercise Price ($)	Expiry Date (m/d/y)
John Calhoun	N/A	Nil	N/A	N/A
Brien Lundin	N/A	Nil	N/A	N/A

	i.	recommending to the Board the external audit or to be nominated for election by the shareholders at each annual general meeting and negotiating the compensation of such external auditor,
	ii.	overseeing the work of the external auditor,
	iii.	reviewing the Company’s annual and interim financial statements, MD&A and press releases regarding earnings before they are reviewed and approved by the Board and publicly disseminated by the Company, and
	iv.	reviewing the Company’s financial reporting procedures and internal controls to ensure adequate procedures are in place for the Company’s public disclosure of financial information extracted or derived from its financial statements, other than disclosure described in the previous paragraph.

	a)	have the authority with respect to the appointment, retention or discharge of the independent public accountants as auditors of the Company (the “Auditors”) who perform the annual audit in accordance with applicable securities laws, and who shall be ultimately accountable to the Board through the Audit Committee;
	b)	review with the Auditors the scope of the audit and the results of the annual audit examination by the auditors, including any reports of the auditors prepared in connection with the annual audit;
	c)	review information, including written statements from the Auditors, concerning any relationships between the Auditors and the Company, or any other relationships that may adversely affect the independence of the Auditors and assess the independence of the Auditors;

	d)	review and discuss with management and the Auditors the Company’s audited financial statements and accompanying Management’s Discussion and Analysis of Financial Conditions (“MD&A”), including a discussion with the Auditors of their judgments as to the quality of the Company’s accounting principles and report on them to the Board;
	e)	review and discuss with management the Company’s interim financial statements and interim MD&A and report on them to the Board;
	f)	pre-approve all auditing services and non-audit services provided to the Company by the Auditors to the extent and in the manner required by applicable law or regulation. In no circumstances shall the Auditors provide any non-audit services to the Company that are prohibited by applicable law or regulation;
	g)	evaluate the external Auditor’s performance for the preceding fiscal year, reviewing their fees and making recommendations to the Board;
	h)	periodically review the adequacy of the Company’s internal controls and ensure that such internal controls are effective;
	i)	review changes in the accounting policies of the Company and accounting and financial reporting proposals that are provided by the Auditors that may have a significant impact on the Company’s financial reports, and report on them to the Board;
	j)	oversee and annually review the Company’s Code of Business Conduct and Ethics;
	k)	approve material contracts where the Board of Directors determines that it has a conflict;
	l)	establish procedures for the receipt, retention and treatment of complaints received by the Company regarding the audit or other accounting matters;
	m)	where unanimously considered necessary by the Audit Committee, engage independent counsel and/or other advisors at the Company’s expense to advise on material issues affecting the Company which the Audit Committee considers are not appropriate for the full Board;
	n)	satisfy itself that management has put into place procedures that facilitate compliance with the provisions of applicable securities laws and regulation relating to insider trading, continuous disclosure and financial reporting;
	o)	review and monitor all related party transactions which may be entered into by the Company; and
	p)	periodically review the adequacy of its charter and recommending any changes thereto to the Board.

	•	was the subject of a cease trade order or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days;
	•	was subject to an event that resulted, after the director or executive officer ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days;
	•	within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

	December 31, 2017	December 31, 2016	December 31, 2015
Research Employees	6	6	5
Administrative Employees	7	7	7

Name and Municipality of Principal Residence	Positions held with the Issuer	Number of Common Shares, Options and Warrants ⁽¹⁾⁽³⁾
Charles Provini, Delray Beach, Florida, USA	Director, President and CEO	1,198,000 common shares 900,000 options
John Meekison , Vancouver B.C., Canada	Former Director ⁽²⁾	10,000 common shares 481,500 options
Brien Lundin , Metairie, LA, USA	Director	3,006,223 common shares 950,000 options 20,000 warrants
John Calhoun , New Orleans, LA, USA	Director	640,900 common shares, 300,000 options 547,500 warrants
Dennis Flood , Columbus, OH, USA	Chief Technology Officer	960,000 common shares 149, 895 warrants

Notes:
(1)	All of the shares held by the Directors are voting common shares and do not have any different voting or other rights than the other outstanding common shares of the Company.
(2)	Mr. Meekison resigned on May 5, 2017.
(3)	The information as to shares beneficially owned or controlled or directed, not being within the knowledge of the Company, has been furnished by the respective directors and officers individually.

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