Base Carbon : Consolidated Financial Statements for the Three Months Ended March 31, 2024 and 2023

BASE CARBON INC.

UNAUDITED CONDENSED INTERIM

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED

MARCH 31, 2024 AND 2023

(EXPRESSED IN UNITED STATES DOLLARS)

Base Carbon Inc.

Condensed Interim Consolidated Statements of Financial Position

(Expressed in United States Dollars)

Unaudited

				March 31	December 31
		Note		2024		2023
ASSETS
Current assets
	Cash and cash equivalents		$	667,391	$	1,400,682
	Short term investments			45,356		45,237
	Other receivables			66,163		24,747
	Related party loan receivable			6,665		425,954
	Prepaid and other assets			19,579		81,529
	Current investments in carbon credit projects	4		36,702,707		34,813,455
				37,507,861		36,791,604
Non-current assets
	Property and equipment			127,005		137,826
	Non-current investments in carbon credit projects	4		81,636,293		102,272,786
	Investments at fair value	5		1,791,163		2,041,163
Total Assets		$	121,062,322	$	141,243,379
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
	Accounts payable and accrued liabilities		$	1,134,329	$	451,672
	Current tax liabilities	6		8,311		8,311
				1,142,640		459,983
Non-current liabilities
	Deferred tax liabilities	6		4,945,900		5,984,368
	Lease liability			98,098		110,169
Total liabilities		$	6,186,638	$	6,554,520
Shareholders' Equity
	Share capital	7	$	51,411,511	$	51,448,159
	Contributed surplus	8		1,715,185		1,654,038
	Retained earnings			61,748,988		81,586,662
Total shareholders' equity			114,875,684		134,688,859
Total Liabilities and Shareholders' Equity		$	121,062,322	$	141,243,379

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

Approved and authorized on behalf of the Board of Directors:

Director	Michael Costa (signed)	Director	Margot Naudie (signed)

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Base Carbon Inc.

Condensed Interim Consolidated Statements of Loss and Comprehensive Loss

(Expressed in United States Dollars)

Unaudited

			For the three months ended
			March 31,		March 31,
	Note		2024		2023
Loss on investments in carbon credit projects	4	$(18,881,241)		-
Operating expenses
Consulting		$	419,690	$	165,613
Professional fees			350,888		119,568
Salaries and wages			569,803		452,205
General and administrative			159,846		57,613
Travel, marketing, and promotion			79,028		130,441
Depreciation			12,453		571
Regulatory expenses			18,532		22,003
Insurance			90,453		146,114
Share-based compensation			61,147		195,194
Total operating expenses			1,761,840		1,289,322
Operating loss for the period		$(20,643,081)	$	(1,289,322)
Foreign exchange gain			10,224		273,787
Interest income			7,672		71,899
Interest expense			(957)		-
Share of loss of investment in associate			-		(156,617)
Loss on investments at fair value	5		(250,000)		-
Net loss before income tax for the period		$(20,876,142)	$	(1,100,253)
Income tax recovery	6		1,038,468		-
Net loss for the period		(19,837,674)		(1,100,253)
Net loss attributable to:
Shareholders of the Company		(19,837,674)		(1,091,508)
Non-controlling interest			-		(8,745)
Net loss for the period		(19,837,674)		(1,100,253)
Comprehensive loss attributable to:
Shareholders of the Company		(19,837,674)		(1,091,508)
Non-controlling interest			-		(8,745)
Comprehensive loss for the period		$(19,837,674)	$	(1,100,253)
Basic and diluted loss per share	9	$	(0.17)	$	(0.01)
Basic and weighted average number of common shares		117,839,951	123,024,808

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

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Base Carbon Inc.

Condensed Interim Consolidated Statement of Cash Flows

(Expressed in United States Dollars)

Unaudited

	For the three months ended
		March 31,		March 31,
		2024		2023
Cash provided by (used in):
Operating Activities
Net loss for period	$(19,837,674)	$	(1,100,253)
Adjustment for:
Depreciation		12,453		571
Share-based compensation		61,147		195,194
Unrealized loss on investments in carbon credit projects		18,881,241		-
Foreign exchange gain		(10,224)		(273,787)
Share of loss of equity accounted investments		-		156,617
Loss on investments at fair value		250,000		-
Changes in operating assets and liabilities:
Other receivables		(41,416)		-
Related party receivable		419,289		(225,580)
Prepaid and other assets		61,950		(217,573)
Accounts payable and accrued liabilities		682,657		86,894
Deferred tax liabilities		(1,038,468)		-
Lease liability		(12,071)		-
Investments in carbon credit projects		(134,000)		(3,041,105)
Net cash used in operating activities	$	(705,116)	$	(4,419,022)
Investing Activities
Short term investment		(119)		-
Purchase of property and equipment		(1,632)		-
Net cash used in investing activities		(1,751)		-
Financing Activities
Repurchase of shares		(36,648)		(211,089)
Net cash used in financing activities		(36,648)		(211,089)
Decrease in cash and cash equivalents		(743,515)		(4,630,111)
Change in cash related to foreign exchange		10,224		272,615
Cash and cash equivalents, beginning of period		1,400,682		12,918,436
Cash and cash equivalents, end of period	$	667,391	$	8,560,940

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

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Base Carbon Inc.
Condensed Interim Consolidated Statement of Changes in Equity
(Expressed in United States Dollars)
Unaudited
		Attributable to owners of the company
						Retained Earnings		Non-
	Number of			Contributed	controlling	Shareholders'
			(Deficit)
	Shares	Common shares		surplus		Interest	Equity
Balance, December 31, 2022	123,339,602	$	53,337,621	$	1,327,662	$	(17,004,025)	$	6,196,408	$	43,857,666
Net loss for the period	-		-		-		(1,091,508)		-		(1,091,508)
Stock based compensation	-		-		195,194		-		-		195,194
Shares purchased and cancelled	(604,000)		(211,089)		-		-		-		(211,089)
Non-controlling interest	-		-		-		-		(8,745)		(8,745)
Balance, March 31, 2023	122,735,602	$	53,126,532	$	1,522,856	$	(18,095,533)	$	6,187,663	$	42,741,518
Balance, December 31, 2023	117,918,182	$	51,448,159	$	1,654,038	$	81,586,662		-	$	134,688,859
Net loss for the period	-		-		-		(19,837,674)		-		(19,837,674)
Stock based compensation	-		-		61,147		-		-		61,147
Shares purchased and cancelled	(95,000)		(36,648)		-		-		-		(36,648)
Balance, March 31, 2024	117,823,182	$	51,411,511	$	1,715,185	$	61,748,988		-	$	114,875,684

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

4

Base Carbon Inc.

Notes to Unaudited Condensed Interim Consolidated Financial Statements For the three months ended March 31, 2024, and 2023

(Expressed in United States Dollars)

1. Nature of operations

Base Carbon Inc. ("Base Carbon" or, the "Company" is a publicly traded entity which is listed on Cboe Canada under the trading symbol "BCBN" and trading on the OTCQX Best Market under the symbol "BCBNF". Base Carbon runs general operations, including its ownership interest in carbon reduction and removal projects, through its wholly owned subsidiary, Base Carbon Capital Partners Corp. ("BCCPC").

Base Carbon, through BCCPC, is in the business of providing capital, development expertise and management operating resources to projects involved primarily in the voluntary carbon markets and the broader environmental markets. The Company seeks to be the preferred carbon project partner in providing capital and developmental resources to carbon projects globally and, where appropriate, will endeavour to utilize technologies within the evolving carbon industry to enhance efficiencies, commercial credibility, and trading transparency.

The Company exists under the Business Corporations Act (Ontario). The Company's registered and mailing address is 50 Carroll Street, Toronto, Ontario, M4M 3G3.

2. Basis of preparation

1. Statement of compliance

These unaudited condensed interim consolidated financial statements for the three months ended March 31, 2024, were prepared in accordance with International Accounting Standard 34, and do not include all the information required for full annual financial statements. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company's annual consolidated financial statements for the year ended December 31, 2023.

Effective January 1, 2024, amendments to IAS 1 Presentation to Financial Statements requires classification of liabilities with covenants as current or non-current. The amendments specify that for a liability to be classified as non-current, a company must have the right to defer settlement of the liability for at least twelve months after the reporting period. The right must have substance and exist at the end of the reporting period and the classification of the liability must be unaffected by the likelihood that the company will exercise that right. If a company is required to comply with covenants on or before the end of the reporting period, these covenants will affect whether such a right exists at the end of the reporting period. These adopted amendments had no impact on the Company's unaudited condensed interim consolidated financial statements for the months ended March 31, 2024.

The accounting policies as disclosed in the annual financial statements for the year ended December 31, 2023 have been applied consistently to the periods presented in these unaudited condensed interim consolidated financial statements unless otherwise noted under Note 3 Material Accounting Policies.

These unaudited condensed interim consolidated financial statements were approved and authorized for issuance by the Board of Directors on May 10, 2024.

1. Going Concern

These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis which presumes that the Company will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the normal course of its operations. Refer to Note 11 Risk Management - Liquidity Risk and Note 14 Subsequent Events for details.

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Base Carbon Inc.

Notes to Unaudited Condensed Interim Consolidated Financial Statements For the three months ended March 31, 2024, and 2023

(Expressed in United States Dollars)

1. Basis of measurement

These financial statements have been prepared on a historical cost basis except for the Company's financial instruments, stock options, investments in carbon credit projects, and investments at fair value, which are measured at fair value.

1. Basis of consolidation

These financial statements include the accounts of the Company and its subsidiary companies after eliminating intercompany balances and transactions. Subsidiaries are entities over which the Company has the power to govern financial and operating policies, generally accompanying a shareholding of greater than 50% of the voting rights.

At March 31, 2024, the Company's subsidiaries and consolidation basis are as follows:

			Ownership as at
	Functional	Place of	March 31,	December
Entity name	currency	incorporation	2024	31, 2023
Base Carbon Capital Partners Corp. (BCCPC)	USD	Barbados	100%	100%
Base Carbon Corp.	USD	Canada	100%	100%
Base Carbon (US) Corp.	USD	United States	100%	100%

For historic details of the Company's investments in subsidiaries, refer to the Company's annual consolidated financial statements for the year ended December 31, 2023.

3. Material accounting policies

1. Use of judgements and estimates

The preparation of these financial statements require management to make certain judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual outcomes could differ from these estimates.

These financial statements include estimates that, by their nature, are uncertain. The impact of these estimates is pervasive throughout the financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

During the three months ended March 31, 2024, the Company assessed and updated its assumptions and estimates for the Rwanda Cookstoves Project, and the Vietnam Household Devices Project. The updated fair value of these projects had a material impact on the Company's statement of operations and comprehensive loss for the three months ended March 31, 2024. Refer to Note 4 Investments in carbon credit projects for details.

Judgements made in applying accounting policies that have the most significant effects on the amounts recognized in these financial statements are included in the following note:

• Accounting for investments in carbon credit projects - management assessed the contractual agreements to determine whether the investments in carbon credit projects are financial instruments and their classification and measurement.

6

Base Carbon Inc.

Notes to Unaudited Condensed Interim Consolidated Financial Statements For the three months ended March 31, 2024, and 2023

(Expressed in United States Dollars)

Information about assumptions and estimate uncertainties that have a significant risk of resulting in a material adjustment in these financial statements is included in the following note:

• Fair values of investments in carbon credit projects - management estimates the fair value using the cost approach or income approach depending on the stage of the investment in carbon credit project.
  Refer to the Company's annual audited financial statements for the year ended December 31, 2023 for details on the assumptions, estimates, and valuation techniques used.

1. Functional and foreign currency translation

The presentation currency of these financial statements is United States dollars. The functional currency of the Company is also the United States dollar. The functional currency for the Company is determined by the currency of the primary economic environment in which it operates.

4. Investments in carbon credit projects Investments in Carbon Credit Project Balances

The following table summarizes the current and non-current balances of investments in carbon credit projects as at March 31, 2024 and December 31, 2023:

Current Investments in Carbon Credit Projects	31-Mar-24	31-Dec-23
Rwanda Cookstoves Project	15,607,572	-
Vietnam Household Devices Project	21,095,135	34,813,455
Total Current Investments in Carbon Credit Projects	36,702,707	34,813,455
Non-Current Investments in Carbon Credit Projects	31-Mar-24	31-Dec-23
Rwanda Cookstoves Project	12,980,533	8,825,000
Vietnam Household Devices Project	64,255,760	89,047,786
India ARR Project	4,400,000	4,400,000
Total Non-current Investments in Carbon Credit Projects	81,636,293	102,272,786

For the Rwanda Cookstoves Project, the current investments balance represents the discounted after-tax cashflows from the sale of carbon credits expected to be received from the project within the next twelve months of the balance sheet date. The non-current investments balance represents the discounted after- tax cashflows from the sale of the carbon credits expected to be received from the project beyond the next twelve months of the balance sheet date.

For the Vietnam Household Devices Project, the current investments balance represents the discounted after-tax cashflows of the projects expected to be received within the next twelve months of the balance sheet date. The non-current balance of the represents the discounted after-tax cashflows of the projects expected to be received beyond the next twelve months of the balance sheet date.

Rwanda Cookstoves Project

On January 25, 2022, the Company, through BCCPC, entered into a carbon reduction project agreement with a subsidiary of the DelAgua Group ("DelAgua") for the funding and supply of cookstoves in Rwanda. Subject to the amending agreement discussed below, pursuant to the terms of the initial project agreement, BCCPC invested $8,825,000 to fund the manufacturing, distribution and monitoring of approximately 250,000 cookstoves across rural Rwanda in exchange for a revenue sharing arrangement with respect to the first 7.5 million carbon credits generated by the project.

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Base Carbon Inc.

Notes to Unaudited Condensed Interim Consolidated Financial Statements For the three months ended March 31, 2024, and 2023

(Expressed in United States Dollars)

In February 2023, DelAgua completed distribution of all 250,000 cookstoves to participating households and the Company fulfilled its capital commitment of $8,825,000.

In December 2023, the Government of Rwanda issued a letter of authorization ("LOA") to allow for the application of the concept of corresponding adjustment pursuant to the Paris international climate agreement with respect to the Rwanda cookstoves project. This resulted in Verra announcing it had applied its article 6 authorized ("Article 6 Authorized") label to the project, being the first time Verra had applied such designation to a carbon project registered with its Verified Carbon Standard Program. According to the LOA, a copy of which may be found on Verra's website under project ID 4150, 2% of any issued Article 6 Authorized labeled carbon credits are to be immediately retired to help offset global emissions, 10% of such carbon credits are to be transferred to the Government of Rwanda to help achieve its nationally determined emission reduction targets, and 5% of revenues generated from the initial sale of the remaining Article 6 Authorized labeled issued carbon credits will be remitted to the United Nations' global adaptation fund ("GAF").

Subsequent to quarter end in April 2024, BCCPC and DelAgua executed an amended and restated project agreement to facilitate the implementation of the LOA. Following execution of this agreement, in April 2024, the Company received its first carbon credits generated from the project when DelAgua transferred 717,558 correspondingly adjusted carbon credits to BCCPC, each designated by Verra with an Article 6 Authorized label.

Under the terms of the revised project agreement, BCCPC and DelAgua have agreed to split the 5% GAF remittance attributable to sales revenue from Article 6 Authorized labeled carbon credits based upon each party's pro rata share outlined in the revenue sharing arrangement between the parties. Article 6 Authorized labeled carbon credits received by the parties pursuant to the Rwanda cookstoves project agreement will be net of the 12% volume reduction outlined in the LOA. Therefore, assuming all carbon credits from the Rwanda cookstoves project are issued with an Article 6 Authorized label, a revised aggregate minimum of approximately 6.6 million carbon credits would now be subject to the revenue sharing arrangement between BCCPC and DelAgua.

Unrealized gain on investment in Rwanda Cookstoves Project

In accordance with IFRS 13, the Company determined that the valuation technique for the Rwanda Cookstoves Project should be changed from the cost approach to the income approach. The income approach uses a discounted cash flow ("DCF") model, totalling the future discounted after-tax cashflows from the lifetime of the project. The Company considers the income valuation technique to be the most relevant and reliable in representing the fair value of the Rwanda Cookstoves Project now that the project has issued carbon credits.

The carbon credit price, carbon credit volumes and discount rates inputs are unobservable inputs that have the most significant impact on the valuation of the investment.

1. Carbon Credit Price

A price curve ranging from $5.27 to $17.12 was used for the project. The prices used were from an independent carbon reduction credit pricing source. The prices used were from an independent carbon credit pricing source.

1. Carbon Credit Volumes:

Following the LOA, a minimum of 6.6 million credits are expected to be generated from the project.

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Base Carbon Inc.

Notes to Unaudited Condensed Interim Consolidated Financial Statements For the three months ended March 31, 2024, and 2023

(Expressed in United States Dollars)

Failing to meet these projected carbon credit volumes in the future will result in significant impairment to the investment value, resulting in losses of unrealized gains.

1. Discount Rate:

A discount rate of 15% is used for the project.

The discount rate account for conditions and risk factors of the project, including;

• Methodology risk relating to carbon reduction and removal projects
• Uncertainty of carbon credit volumes
• Uncertainty of carbon credit price and market conditions
• Foreign operations and political risk

Refer to the DCF model sensitivity analysis for Rwanda and Vietnam projects for details on each inputs' impact on the financial statements.

As a result of the change in valuation technique, the valuation of the project for the period ended March 31, 2024 increased to $28,588,104, resulting in a $19,763,104 unrealized gain over the previous cost value of $8,825,000.

The Company will continue to update its evaluation of the Rwanda Cookstoves Project on a quarterly basis, based on the project performance, market conditions, and various risk factors.

There is no active market or observable market data for the investments in carbon credit projects, and it is classified as Level 3 in the fair value hierarchy.

During the three months ended March 31, 2024, there were no transfers of assets between Level 1, Level 2 and Level 3 for the Rwanda Cookstove Project.

Vietnam Household Devices Project

On May 27, 2022, the Company, through BCCPC, entered into transaction documents to facilitate the development of a cookstove and water purifier carbon reduction project in the country of Vietnam with Sustainability Investment Promotion and Development Joint Stock Company ("SIPCO"), as in-country project developer. Citigroup Global Markets Limited is the carbon credit offtaker to SIPCO for the Vietnam Household Devices Project. The Vietnam Household Devices Project involves the distribution of approximately 850,000 cookstoves and 364,000 water purifiers to participating households in Vietnam. BCCPC has the option to expand the project to an aggregate of 1,200,000 cookstoves and 600,000 water purifiers total for an additional prepayment.

Refer to the Company's annual audited financial statements for the year ended December 31, 2023 for historical details on the first issuance and disposition of carbon credits in 2023.

Due to a change in the project's methodology as registered with Verra, the project is now expected to generate approximately 33 million carbon credits over the life-of-project, inclusive of the initial 7.4 million carbon credits contracted under a fixed price offtake arrangement. After the initial 7.4 million carbon credits contracted under a fixed price offtake arrangement have been delivered ("Phase 1"), BCCPC has the option to purchase credits generated by the project on a yearly basis for US$5 per carbon credit ("Phase 2").

There was no impact to the quantity or commercial terms of the initial 7.4 million carbon credits contracted for sale pursuant to the project's fixed price offtake arrangement.

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