Aton Resources Inc. — Audit Report / Information 2022

Apr 28, 2023

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CONSOLIDATED FINANCIAL STATEMENTS

(Presented in Canadian Dollars)

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

1

Baker Tilly WM LLP 900 – 400 Burrard Street Vancouver, British Columbia Canada V6C 3B7 T: +1 604.684.6212 F: +1 604.688.3497

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vancouver@bakertilly.ca www.bakertilly.ca

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Aton Resources Inc.:

Opinion

We have audited the consolidated financial statements of Aton Resources Inc. and its subsidiaries (together the “Company”), which comprise the consolidated statement of financial position as at December 31, 2022, and the consolidated statement of operations and comprehensive loss, consolidated statement of changes in shareholders’ deficiency and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2022, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 in the financial statements, which describes conditions indicating that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2022. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Except for the matter described in the Material Uncertainty Related to Going Concern section of our auditor’s report, we have determined that there are no other key audit matters to communicate in our report.

Other Matter

The consolidated financial statements of the Company for the year ended December 31, 2021 were audited by another auditor who expressed an unmodified opinion on those consolidated financial statements on April 28, 2022.

Baker Tilly WM LLP is a member of Baker Tilly Canada Cooperative, which is a member of the global network of Baker Tilly International Limited. All members of Baker Tilly Canada Cooperative and Baker Tilly International Limited are separate and independent legal entities.

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Other Information

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

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Graeme L. Cocke.

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CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, B.C. April 28, 2023

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ATON RESOURCES INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars) AS AT DECEMBER 31,

AS AT DECEMBER 31,
	2022 2021
ASSETS Current Cash Receivables Prepayments and advances receivable (Note 6) Equipment and right-of-use asset(Note 4) Mineral exploration concession(Note 6)	$ 116,551 $ 82,266 2,630 3,410 286,298 259,632 405,479 345,308 282,472 415,293 1 1 $ 687,952 $ 760,602
LIABILITIES AND SHAREHOLDERS' DEFICIENCY Current Accounts payable and accrued liabilities (Notes 8 and 13) Lease liabilities (Note 5) Legal provision (Note 13) Loans payable (Note 9) Shareholders' deficiency Share capital (Note 7) Share-based payment reserve (Note 7) Deficit	$ 828,120 $ 967,929 - 43,303 73,417 71,901 7,206,198 4,695,747 8,107,735 5,778,880 33,044,243 28,132,910 6,064,802 4,814,814 (46,528,828) (37,966,002) (7,419,783) (5,018,278) $ 687,952 $ 760,602
Nature of business and going concern(Note 1) Commitments and contingencies(Note 13) Subsequent events(Note 15)

Approved and authorized by the Board of Directors on April 28, 2023.

“Anthony Clements”

Director “Tonno Vahk”

Director

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

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ATON RESOURCES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Presented in Canadian Dollars) FOR THE YEARS ENDED DECEMBER 31,

FOR THE YEARS ENDED DECEMBER 31,
	2022 2021
EXPENSES Depreciation (Note 4) Exploration and evaluation expenditures (Note 6) Finance expense (Note 9) Foreign exchange Investor relations Interest expense (Note 5) Management and consulting fees (Note 8) Office and administration Professional fees Share based payments (Note 7) Accretion expense (Note 9) Other Gain on writing-off of debts Loss and comprehensive loss for the year	$ 133,955 $ 103,303 6,104,158 1,978,791 786,780 470,575 11,310 31,417 142,885 29,887 2,337 2,255 115,469 267,544 55,694 61,045 113,629 126,835 318,984 - 777,625 1,695,133 (8,562,826) (4,766,785) - 141,554 $ (8,562,826) $ (4,625,231)
Basic and diluted loss per common share	$ (0.17) $ (0.14)
Weighted average number of common shares outstanding– basic and diluted	49,860,556 33,700,782

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

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ATON RESOURCES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Presented in Canadian Dollars) FOR THE YEARS ENDED DECEMBER 31,

FOR THE YEARS ENDED DECEMBER 31,
	2022 2021
CASH USED IN OPERATING ACTIVITIES Loss for the year Items not affecting cash: Unrealized foreign exchange Depreciation Interest expense Share based payments Finance expense Accretion expense Gain on writing-off of debts Changes in non-cash working capital items: Receivables Prepayments and advances receivable Accounts payable and accrued liabilities Net cash used in operating activities CASH USED IN INVESTING ACTIVITY Purchase of property plant and equipment Net cash used in investing activity CASH FROM FINANCING ACTIVITIES Private placement proceeds Loan proceeds Share issuance costs Lease payments Net cash provided by financing activities Change in cash during the year Cash, beginning of year Cash, end of year	$ (8,562,826) $ (4,625,231) 658 (1,516) 133,955 103,303 2,337 2,255 318,984 - 786,780 470,575 777,625 1,695,133 - (141,554) 780 320 (26,666) (238,248) (139,809) (689,313) (6,708,182) (3,424,276) - (412,228) - (412,228) 2,000,000 - 4,800,000 3,950,000 (10,750) (20,586) (46,783) (43,069) 6,742,467 3,886,345 34,285 49,841 82,266 32,425 $ 116,551 $ 82,266

Supplemental disclosures with respect to cash flows (Note 12)

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

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ATON RESOURCES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY (Presented in Canadian Dollars)

Share capital

	Number	Amount	Share-based payment reserve	Deficit	Total
Balance at December 31, 2020 Shares issued to settle accounts payable Issuance of bonus warrants Loss for the year Balance at December 31, 2021 Warrants exercised Private placement Issuance of bonus warrants Share issuance costs Share based payments Loss for the year Balance at December 31, 2022	33,698,322 484,784 - - 34,183,106 8,510,638 13,333,333 - - - - 56,027,077	$ 28,016,561 116,349 - - 28,132,910 2,922,083 2,000,000 - (10,750) - - $ 33,044,243	$ 3,017,858 - 1,796,956 - 4,814,814 (922,083) - 1,853,087 - 318,984 - $ 6,064,802	$ (33,340,771) - - (4,625,231) (37,966,002) - - - - - (8,562,826) $(46,528,828)	$ (2,306,352) 116,349 1,796,956 (4,625,231) (5,018,278) 2,000,000 2,000,000 1,853,087 (10,750) 318,984 (8,562,826) $ (7,419,783)

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

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ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

1. NATURE OF BUSINESS AND GOING CONCERN

Aton Resources Inc. (the “ Company ”) operates through its wholly owned subsidiary, Aton Mining Inc., which was incorporated under the Business Corporations Act (British Columbia) on May 17, 2006 and whose principal business activities are the exploration and development of mineral properties in the Arab Republic of Egypt (“ ARE ” or “ Egyp t”). The Company’s principal place of business, registered and records office is located at 666 Burrard Street, Suite 1700, Vancouver, BC, V6C 3P6. The Company’s common shares trade on the TSX Venture Exchange (“ TSX-V ”) under the symbol “ AAN ”.

The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. The Company's continued existence is dependent upon the preservation of its interest in the underlying properties, the discovery of economically recoverable reserves, the achievement of profitable operations, or the ability of the Company to raise alternative financing, if necessary, or alternatively upon the Company's ability to dispose of its interests on an advantageous basis. The Company's exploration assets are located outside of Canada and are subject to the risk of foreign investment, including political uncertainty, increases in taxes and royalties, renegotiation of contracts and currency exchange fluctuations.

Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements, unregistered claims, other land claims and non-compliance with regulatory and environmental requirements.

Going Concern

The Company is a mineral exploration company focused on acquiring and exploring mineral properties in the ARE. The ability of the Company to realize the costs it has incurred to date on these properties is dependent upon the Company identifying a commercial mineral body, to finance its development costs and to resolve any environmental, regulatory or other constraints which may hinder the successful development of the property. To date, the Company has not earned any revenues and is considered to be in the exploration stage.

The consolidated financial statements have been prepared assuming the Company will continue on a going-concern basis, 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. The Company has incurred losses since its inception and the ability of the Company to continue as a going concern depends upon its ability to raise adequate financing and to develop profitable operations. As at December 31, 2022, the Company has a deficit of $46,528,828 (2021 - $37,966,002) and a working capital deficit of $7,702,256 (2021 - $5,433,572). These conditions create a material uncertainty that may cast significant doubt upon the Company’s ability to continue as a going concern. The financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations.

Management is actively targeting sources of additional financing through alliances with financial, exploration and mining entities, and other business and financial transactions which would assure continuation of the Company’s operations and exploration programs. In addition, management closely monitors commodity prices of precious metals, individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company if favourable or adverse market conditions occur.

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ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

2. BASIS OF PREPARATION

Statement of Compliance

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

Basis of Presentation

The consolidated financial statements have been prepared on a historical cost basis except for certain financial assets that are measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for the cash flow information. All dollar amounts presented are in Canadian dollars unless otherwise specified.

These consolidated financial statements incorporate the financial statements of the Company and its controlled subsidiaries. Control exists when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. All intercompany transactions and balances have been eliminated.

The Company’s subsidiaries are as follows:

		Ownership
Name ofSubsidiary	Country of incorporation	Interest
Aton Mining Inc.	Canada	100%
Seventh Cleo Holdings Inc.	British Virgin Islands	100%
New Chelsea Holdings Inc.	British Virgin Islands	100%
Canex Enterprises Inc.	British Virgin Islands	50%

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ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

2. BASIS OF PREPARATION (cont’d…)

Use of Estimates and Judgments

The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported expenses during the year. Actual results could differ from these estimates.

Critical Accounting Estimates

Share-based payments are subject to estimation of the value of the award at the date of grant using pricing models such as the Black-Scholes option pricing model. The option pricing model requires the input of highly subjective assumptions including the expected share price volatility. Because the Company’s bonus warrants have characteristics significantly different from those of traded options and because the subjective input assumptions can materially affect the calculated fair value, such value is subject to measurement uncertainty.

Critical Accounting Judgments

Management has made judgments regarding the functional currency of the Company and has determined that the functional currency of the Company and its subsidiaries are the Canadian dollar.

Acquisition costs related to mineral exploration concessions are initially capitalized as intangible exploration assets with the intent to establish commercially viable reserves. Ownership in mineral exploration concessions involves certain inherent risks, including geological, metal prices, operating costs, and permitting risks. Many of these risks are outside the Company’s control. The Company is required to make judgments about the future events and circumstances regarding whether the carrying amount of intangible exploration assets exceed their recoverable amount. The ultimate recoverability of the amounts capitalized for the mineral exploration concessions is dependent upon the delineation of economically recoverable ore reserves, obtaining the necessary financing to complete their development, obtaining the necessary permits to operate a mine, and realizing profitable production or proceeds from the disposition thereof. Management’s estimates of recoverability of the Company’s investment in its mineral exploration concessions have been based on current and expected conditions. However, it is possible that changes could occur which could adversely affect management’s estimates and may result in future write downs of mineral exploration concessions carrying values.

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ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

3. SIGNIFICANT ACCOUNTING POLICIES

Earnings (loss) per share

The Company presents basic earnings (loss) per share for its common shares, calculated by dividing the earnings (loss) attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted earnings per share reflect the potential dilution of securities that could share in earnings of an entity by including additional shares in the weighted average number of shares outstanding for the assumed exercise of stock options and warrants. Diluted loss per share does not adjust the loss attributable to common shareholders or the weighted average number of common shares outstanding as the effect of potentially dilutive instruments is anti-dilutive.

Existing stock options and warrants have not been included in the computation of diluted loss per share as to do so would be anti-dilutive.

Financial Instruments

The Company recognizes a financial instrument when it becomes party to a contract. The Company classifies its financial assets and financial liabilities into the following three categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (“FVOCI”), and at amortized cost. The determination of classification is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument.

The Company’s financial instruments are classified as follows:

Financial instrument	Classification
Cash Prepayments and advances receivable Accounts payable and accrued liabilities Loans payable	FVTPL Amortized cost Amortized cost Amortized cost

FVTPL – financial assets and liabilities are classified as fair value through profit or loss if they do not meet the criteria of amortized cost or FVTOCI. They are initially recorded at fair value and transaction costs are expensed in profit or loss. Realized and unrealized gains or losses arising from changes in the fair value of the financial assets and liabilities are recognized in profit or loss in the period in which they arise.

Amortized cost – financial assets are classified at amortized cost where the asset is held within a business model whose objective is to hold the financial asset in order to collect contractual cash flows, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL or if the Company has opted to measure them at FVTPL. Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment. Financial instruments measured at amortized cost utilize the effective interest method of accounting. The ‘effective interest rate’ is the rate that discounts estimated future cash payments over the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortized cost of the financial liability. The effective interest rate is calculated considering all contractual terms of the financial instruments, except for the expected credit losses of financial assets. Interest expense is reported in profit or loss.

FVOCI – Financial assets held to achieve a particular business objective other than short-term trading are designated at FVOCI. The Company also has the ability to make an irrevocable election at initial recognition of a financial asset, on an instrument-by-instrument basis, to designate an equity investment that would otherwise be classified as FVTPL and that is neither held for trading nor contingent consideration arising from a business combination to be classified as FVOCI. There is no recycling of gains or losses through profit or loss. Upon derecognition of the asset, accumulated gains or losses are transferred from Other Comprehensive Income (“OCI”) directly to deficit.

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ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

Financial Instruments (cont’d…)

Impairment of financial assets

The Company assesses all information available, including on a forward-looking basis, the expected credit losses associated with its assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. To assess whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as of the reporting date, with the risk of default as at the date of initial recognition, based on all information available, and reasonable and supportive forward-looking information.

In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed as an impairment gain through profit or loss to the extent that the carrying amount of the investment at the date of the impairment gain does not exceed what the amortized cost would have been had the impairment not been recognized.

Evidence of impairment may include indications that the counterparty debtor is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Financial assets are reviewed on a case-by-case basis to determine whether they need to be written off.

Derecognition

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity.

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

Gains and losses on derecognition are recognized in profit or loss.

Evaluation and exploration expenditures

Evaluation and exploration expenditures, are expensed as incurred until such time as mineral exploration concessions are proven or probable, permits to operate a mine on the mineral resource property are received and financing to complete development of a mine has been obtained. Following confirmation of mineral reserves, receipt of permits to commence mining operations and obtaining necessary financing, evaluation and exploration expenditures are capitalized as deferred development expenditures and are included within equipment.

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ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

Mineral exploration concessions

Mineral exploration concessions include acquired mineral rights for mineral exploration properties held by the Company. The amount of consideration paid (in cash or share value) for mineral rights is capitalized. The amounts shown for mineral exploration concessions represent costs of acquisition, other than transaction costs, incurred to date, less recoveries, and do not necessarily reflect present or future values. These costs will be amortized against revenue from future production or written off if the mineral exploration concessions are abandoned or sold. Included in the cost of mineral exploration concessions is the cost of any estimated decommissioning liability. The Company has classified mineral exploration concessions as intangible in nature. Depletion of costs capitalized on projects put into commercial production will be recorded using the unit-of-production method based upon reserves.

Income taxes

Income tax on the profit or loss for the periods presented comprises current income tax and deferred tax. Current income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current income tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is recorded using the liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting nor taxable loss; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the date of the consolidated statement of financial position.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.

Additional income taxes that arise from the distribution of dividends are recognized at the same time as the liability to pay the related dividend. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Provision for environmental rehabilitation

The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of mineral properties and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to mining assets along with a corresponding increase in the rehabilitation provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The rehabilitation asset is depreciated on the same basis as mining assets.

The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to mining assets with a corresponding entry to the rehabilitation provision. The Company’s estimates are reviewed each reporting date for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates.

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ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

Provision for environmental rehabilitation (cont’d…)

Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit and loss for the period. For the years presented, the Company has not recorded any provisions for environmental rehabilitation.

Equipment

Equipment items are carried at cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognized using the declining balance method at the following annual rates:

Field and Office Equipment Declining-Balance 20% Vehicles and Field Accommodations Declining-Balance 30%

Equipment that is withdrawn from use or has no reasonable prospect of being recovered through use or sale, are regularly identified and written off.

The assets' residual values, depreciation methods and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

Subsequent expenditure relating to an item of equipment is capitalized when it is probable that future economic benefits from the use of the assets will be increased. All other subsequent expenditure is recognized as repairs and maintenance expense.

Foreign exchange

The functional currency is the currency of the primary economic environment in which the entity operates and has been determined for each entity within the Company. The functional currency of the Company and for all entities within the Company is the Canadian dollar. The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates.

Transactions in currencies other than the Canadian dollar are recorded at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, the monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the rate of exchange at the date of the consolidated statement of financial position. Revenues and expenses are translated at exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are included in profit or loss.

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ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

Impairment

At the end of each reporting period, the Company’s assets are reviewed to determine whether there is any indication that those assets may be impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs of disposal and value in use. Fair value less costs of disposal is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Share-based payments

The fair value of all share-based payments granted is recorded, at the measurement date fair value, as an asset or a charge to profit or loss and as a credit to share-based payment reserve.

The fair value of share-based awards granted to employees and others providing similar services which vest immediately is recorded at the date of grant. The fair value of share-based awards which vest in the future is recognized over the vesting period, as adjusted for the expected level of vesting of the options. The fair value of share-based awards is estimated using the Black-Scholes option pricing model, with estimated volatility based on the historical volatility of the Company’s share price. Share-based awards granted to parties other than employees and those providing similar services are measured at the fair value of the goods and services received on the date of receipt. If the fair value of the goods and services received cannot be reliably measured, their value is estimated using the Black-Scholes option pricing model, with estimated volatility based on the historical volatility of the Company’s share price.

Any consideration received on the exercise of share-based awards together with the related portion of share-based payment reserve attributed to the exercised share-based awards is credited to share capital. When share-based awards expire unexercised or are cancelled, the amounts recorded in share-based payment reserve with respect to those sharebased payments are not reclassified within equity.

Share capital

Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares and share options are recognized as a deduction from equity, net of any tax effects. Common shares issued for consideration other than cash, are valued based on their market value at the date the shares are issued.

When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognized as a deduction from equity. Share capital is reduced by the average per-common-share carrying amount, with the difference between this amount and the consideration paid, added to or deducted from share-based payment reserve.

13

ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

Share capital (cont’d…)

The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the common shares based on the quoted market price of the common shares on the issuance date, with the residual value allocated to the warrants. Any fair value attributed to the warrants is recorded as share-based payment reserve.

Leases

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company assesses whether the contract involves the use of an identified asset, whether the Company has the right to obtain substantially all of the economic benefits from use of the asset during the term of the arrangement and if the Company have the right to direct the use of the asset.

As a lessee, the Company recognize a right-of-use asset, and a lease liability at the commencement date of a lease. The right-of-use asset is initially measured at cost, which is comprised of the initial amount of the lease liability adjusted for any payments made at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received.

The right-of-use asset is subsequently depreciated from the commencement date to the earlier of the end of the lease term, or the end of the useful life of the asset. In addition, the right-of-use asset may be reduced due to impairment losses, if any, and adjusted for certain measurements of the lease liability.

A lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental borrowing rate. Lease payments included in the measurement of the lease liability are comprised of:

• fixed payments, including in-substance fixed payments, less any lease incentives receivable;

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• amounts expected to be payable under a residual value guarantee;

• exercise prices of purchase options if the Company is reasonably certain to exercise that option; and

• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if there is a change in the estimate or assessment of the expected amount payable under a residual value guarantee, purchase, extension or termination option. Variable lease payments not included in the initial measurement of the lease liability are charged directly to profit or loss.

14

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

ATON RESOURCES INC.

4. EQUIPMENT AND RIGHT-OF-USE ASSET

	Field and office equipment	Vehicles and field accommodations	Right-of-use asset –officelease	Total
Cost Balance, December 31, 2020 Additions Balance, December 31, 2021 and 2022	$ 296,023 170,171 $ 466,194	$ 350,556 242,057 $ 592,613	$ 65,122 84,117 $ 149,239	$ 711,701 496,345 $ 1,208,046
Accumulated depreciation Balance, December 31, 2020 Depreciation for the year Balance, December 31, 2021 Depreciation for the year Foreign exchange Balance, December 31, 2022	$ 288,892 10,235 299,127 33,413 - $ 332,540	$ 335,436 51,917 387,353 56,442 - $ 443,795	$ 65,122 41,151 106,273 44,100 (1,134) $ 149,239	$ 689,450 103,303 792,753 133,955 (1,134) $ 925,574
Carrying amounts As at December 31, 2021 As atDecember31,2022	$ 167,067 $ 133,654	$ 205,260 $ 148,818	$ 42,966 $ -	$ 415,293 $ 282,472

5. LEASE LIABILITIES

Pursuant to IFRS 16, the Company has recognized the impact of lease obligations. During the year ended December 31, 2021, through amendments to lease payment schedules, the Company revalued the remaining payments and recognized lease liabilities and right-of-use assets of $84,117.

The following is a continuity schedule of lease liability for the years presented:

		December 31,		December 31,
Lease liabilities		2022		2021
Opening balance	$	43,303	$	-
IFRS transition		-		84,117
Lease accretion		2,337		2,255
Lease payments		(46,783)		(43,069)
Foreign exchange		1,143		-
		-		43,303
Currentportion of lease liabilities		-		(43,303)
Lease liabilities	$	-		-

The Company’s office lease in Egypt had a term ending December 31, 2022. The landlord has agreed to renew the lease for one year.

15

ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

6. MINERAL EXPLORATION CONCESSION

Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral properties. The Company has investigated title to all of its mineral properties, and, to the best of its knowledge, title to all of its properties, are properly registered and in good standing. Each mineral concession is considered to be a separate cash generating unit (“CGU”).

Through the Company’s wholly owned subsidiary, Aton Mining Inc., the Company holds the Abu Marawat exploration concession in Egypt.

The Abu Marawat Concession Agreement is defined by multiple phases of exploration with a required minimum exploration obligation for each phase of exploration. Phase I has a duration of one year, Phase II-A, is for a duration of two years and Phase II-B has a duration of two 'years. An additional six months may be applied with the approval of Egyptian Mineral Resources Authority (“EMRA”) at the end of the last phase of exploration.

The Abu Marawat Concession has met the minimum financial obligation for all three phases and the Company is required to provide a 2% training fee on the total exploration expenditure for the fiscal year.

For the Abu Marawat Concession, on April 23, 2020 EMRA granted the Company a further extension to the Phase IIB exploration period, which will now expire on March 4, 2023. The Company was granted a force majeure compensation period of five months and twenty days, which has been added to the final exploration period of its current exploration license, which will now expire on August 25, 2023.

During the year ended December 31, 2021, the Company had advanced a deposit of $253,560 (US$200,000) on the Abu Marawat project, which remains in prepayments and advances receivable during the year ended December 31, 2022.

16

ATON RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

6. MINERAL EXPLORATION CONCESSION (cont’d…)

Cumulative exploration and evaluation expenditures are as follows:

		As at				As at				As at
	December 31,					December 31,			December 31,
		2020		Additions		2021		Additions		2022
Concession access	$	163,392	$	-	$	163,392	$	-	$	163,392
Mapping		6,429		-		6,429		-		6,429
Labour		3,555,385		692,225		4,247,610		881,324		5,128,934
Field costs		2,689,931		455,471		3,145,402		848,936		3,994,338
Camp upgrade		96,954		-		96,954		-		96,954
Mobilization		217,292		-		217,292		-		217,292
Drilling		4,645,428		396,293		5,041,721		2,891,816		7,933,537
Start-up		41,515		-		41,515		-		41,515
Geological services		1,653,544		147,138		1,800,682		353,526		2,154,208
Geophysics		607,003		15,414		622,417		2,781		625,198
Assaying		1,949,226		77,508		2,026,734		655,880		2,682,614
Travel		704,367		31,497		735,864		68,648		804,512
		16,167,074		1,815,546		17,982,620		5,702,911		23,685,531
Consulting		3,251,168		73,887		3,325,055		351,929		3,676,984
Administration		2,184,083		89,358		2,273,441		49,318		2,322,759
		5,435,251		163,245		5,598,496		401,247		5,999,743
	$	21,765,717	$	1,978,791	$	23,744,508	$	6,104,158	$	29,848,666

7. SHARE CAPITAL AND SHARE-BASED PAYMENT RESERVE

Authorized share capital

The Company’s authorized share capital consists of an unlimited number of common shares without par value.

Issued share capital

As at December 31, 2022, the Company had 56,027,077 common shares issued and outstanding.

Share issuances

During the year ended December 31, 2022, the Company:

• a) Issued 8,510,638 common shares on the exercise of warrants for an aggregate of $2,000,000. The warrants were exercised under a direction to pay provided by OU Moonrider (“Moonrider”) (Note 9).

• b) Completed a non-brokered private placement by issuing 13,333,333 common shares priced at $0.15 per share for gross proceeds of $2,000,000, less share issuance costs of $10,750.

During the year ended December 31, 2021, the Company issued 484,785 common shares at a fair value of $0.24 per common share to settle a total of $116,349 in debt owed to directors and employees.

17

ATON RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

7. SHARE CAPITAL AND SHARE-BASED PAYMENT RESERVE (cont’d…)

Stock options and warrants

Stock option and warrant transactions are summarized as follows:

	Options Number of Shares Weighted Average Exercise Price	Warrants
		Number of Shares Weighted Average Exercise Price
Balance, December 31, 2020 Cancelled/Expired Granted Balance, December 31, 2021 Cancelled/Expired Exercised Granted Balance, December 31, 2022	2,677,500 $ 0.61 (838,500) 0.70 - -	14,266,355 $ 0.71 (7,826,500) 0.78 17,159,253 0.22
	1,839,000 $ 0.56 (1,239,500) 0.59 - - 3,000,000 0.42	23,599,108 $ 0.33 (8,648,615) 0.22 (8,510,638) 0.24 17,681,775 0.23
	3,599,500 $ 0.50	24,121,630 $ 0.33

Stock options outstanding

The following incentive stock options were outstanding at December 31, 2022:

	Number outstanding Number exercisable Exercise price Expiry date
Stock Options	599,500 599,500 $ 0.50 July 10, 2023 3,000,000 750,000 $ 0.50 September 28, 2027 3,599,500 1,349,500

Stock warrants outstanding

As at December 31, 2022, warrants were outstanding as follows:

Warrants	Number outstanding Number exercisable Exercise price Expiry date
	2,941,176 2,941,176 $ 0.19 January 4, 2023(1) 2,173,913 2,173,913 $ 0.23 January 26, 2023(1) 4,065,162 4,065,162 $ 0.50 February 13, 2023(1) 2,174,693 2,174,693 $ 0.80 May 28, 2023 1,261,741 1,261,741 $ 0.31 July 14, 2023 2,214,036 2,214,036 $ 0.28 July 27, 2023 9,090,909 9,090,909 $ 0.22 September 21, 2023 200,000 200,000 $ 0.80 October 30, 2023 24,121,630 24,121,630

(1) Expired, unexercised, subsequent to the year ended December 31, 2022.

18

ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

7. SHARE CAPITAL AND SHARE-BASED PAYMENT RESERVE (cont’d…)

Share-based payments

The Company has a stock option plan under which it is authorized to grant options to executive officers and directors, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common stock of the Company. The fair value of stock options is determined by the Black-Scholes Option Pricing Model with assumptions for risk-free interest rates, dividend yields, volatility factors of the expected market price of the Company’s shares, forfeiture rate, and expected life of the options. Under the plan the exercise price of each option equals the market price of the Company’s stock, less applicable discount, as calculated on the date of grant.

In the year ended December 31, 2022, the Company granted 3,000,000 (2021 – nil) options with an exercise price of $0.50 (2021 - $nil) and weighted average fair value of $0.20 (2021 - $nil) per option. In the year ended December 31, 2022, the Company recognized share-based payments expense of $318,984 (2021 - $nil) for options vesting in the year.

The following weighted average assumptions were used for the valuation of stock options granted in the respective periods:

	2022	2021
Risk-free interest rate	3.37%	-
Expected life of options	5 years	-
Annualized volatility	175.93%	-
Dividend rate	0.00%	-
Forfeiture rate	0.00%	-

8. RELATED PARTY TRANSACTIONS

Key management personnel compensation

Key management personnel are those persons having the authority and responsibility for planning, directing, and controlling activities of the Company, directly or indirectly. The key management personnel of the Company are the members of the Company’s executive management team and Board of Directors. An entity controlled by the CEO has significant influence over the Company due to holding approximately 31% of the Company’s common shares. The remuneration of directors and management including the CEO and CFO were as follows:

		For the years ended	December	31
		2022		2021
Management and consulting fees	$	48,000	$	187,423
Directors’fees		45,000		56,653
	$	93,000	$	244,076

The balances due to the Company’s current and former directors and officers included in accounts payable and accrued liabilities were $789 (2021 - $30,851). These amounts are unsecured, non-interest bearing and payable on demand.

During the year ended December 31, 2022, the Company recognized share-based payments expense of $116,961 (2021 - $nil) related to the fair value of stock options granted and vested to key management personnel.

During the year ended December 31, 2021, the Company issued 427,082 common shares to settle a total of $102,500 in debt owed to directors and a former director.

19

ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

8. RELATED PARTY TRANSACTIONS (cont’d…)

Key management personnel compensation (cont’d…)

Loans payable are due to Moonrider, a shareholder owning approximately 31% of the Company’s common shares at December 31, 2022 (a “significant shareholder”), who has significant influence over the Company. Transactions with Moonrider are detailed in notes 7 and 9.

9. LOANS PAYABLE

The loans payable are due to Moonrider, a significant shareholder of the Company.

The following is a continuity schedule of loans payable for the years presented:

	December 31, 2022	December 31, 2022	December 31, 2021	December 31, 2021
Balance – beginning of year	$	4,695,747	$	378,511
Advances of loans		4,800,000		3,950,000
Loan and interest repayment		(2,000,000)		-
Interest accrued – finance expense		786,780		470,575
Issuance of bonus warrants on loans payable		(1,853,087)		(1,796,956)
Accretion expense		777,625		1,695,133
Unrealized foreign exchange		(867)		(1,516)
	$	7,206,198	$	4,695,747

During the year ended December 31, 2022, the Company settled an aggregate of $2,000,000 in loans and interest payable pursuant to a direction to pay (“DTP”) issued by Moonrider for the exercise of 8,510,638 warrants (Note 7). The funds were applied against $1,273,168 in principal repayments and $716,952 in interest repayments. The funds were applied against the oldest facilities first in settlement of any facilities issued in the year ended December 31, 2020 and carrying forward into interest and principal drawn down in the year ended December 31, 2021.

During the year ended December 31, 2022, the Company:

• a) Entered into a bridge loan facility (the “Seventh Facility”) with Moonrider, for $500,000. Pursuant to the Seventh Facility, the Company borrowed $500,000 from Moonrider at an interest rate of 12% per annum with a maturity date of July 4, 2022, then 20% per annum after maturity. On July 14, 2022, Moonrider has agreed to extend the maturity date to June 30, 2023 at an interest rate of 12% per annum. In connection with the Seventh Facility, Moonrider was issued bonus warrants in January 2022 entitling it to acquire 2,941,176 common shares of the Company at a price of $0.19 per share. The bonus warrants are exercisable for a period of 12 months from issuance. These bonus warrants had a fair value of $134,311 calculated using the BlackScholes option pricing model, with inputs of: a risk-free interest rate of 0.98%, expected life of 1 year, dividend of 0% and volatility of 77.94%, which is accreted over 12 months. The bonus warrants are exercisable for a period of 12 months from issuance. During the year ended December 31, 2022, $13,973 in interest payable was settled by way of the DTP.

20

ATON RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

9. LOANS PAYABLE (cont’d…)

During the year ended December 31, 2022, the Company (cont’d…):

• b) Entered into a bridge loan facility (the “Eighth Facility”) with Moonrider, for $500,000. Pursuant to the Eighth Facility, the Company borrowed $500,000 from Moonrider at an interest rate of 12% per annum with a maturity date of July 26, 2022, then 20% per annum after maturity. On July 14, 2022, Moonrider has agreed to extend the maturity date to June 30, 2023 at an interest rate of 12% per annum. In connection with the Eighth Facility, Moonrider was issued bonus warrants in January 2022 entitling it to acquire 2,173,913 common shares of the Company at a price of $0.23 per share. The bonus warrants are exercisable for a period of 12 months from issuance. These bonus warrants had a fair value of $158,443 calculated using the Black-Scholes option pricing model, with inputs of: a risk-free interest rate of 1.22%, expected life of 1 year, dividend of 0% and volatility of 80.50%, which is accreted over 12 months. The bonus warrants are exercisable for a period of 12 months from issuance. During the year ended December 31, 2022, $10,356 in interest payable was settled by way of the DTP.

• c) Entered into a bridge loan facility (the “Ninth Facility”) with Moonrider, for $1,000,000. Pursuant to the Ninth Facility, the Company borrowed $1,000,000 from Moonrider at an interest rate of 12% per annum with a maturity date of July 14, 2023, then 20% per annum after maturity. In connection with the Ninth Facility, Moonrider was issued bonus warrants in July 2022 of two tranches, entitling it to acquire 3,475,777 common shares of the Company at a price of $0.31 and $0.275 per share, respectively. The bonus warrants are exercisable for a period of 12 months from issuance. These bonus warrants had a fair value of $198,562 and $318,630 calculated using the Black-Scholes option pricing model, with inputs of: a risk-free interest rate of 3.25% and 3.09%, expected life of 1 year, dividend of 0% and volatility of 134.77% and 139.95%, which is accreted over 12 months. The bonus warrants are exercisable for a period of 12 months from issuance with expiration dates of July 14, and 27, 2023.

• d) Entered into a bridge loan facility (the “Tenth Facility”) with Moonrider, for $2,000,000. Pursuant to the Tenth Facility, the Company borrowed $2,000,000 from Moonrider at an interest rate of 12% per annum with a maturity date of September 21, 2023, then 20% per annum after maturity. In connection with the Tenth Facility, Moonrider was issued bonus warrants in September 2022 entitling it to acquire 9,090,909 common shares of the Company at a price of $0.22 per share. The bonus warrants are exercisable for a period of 12 months from issuance. These bonus warrants had a fair value of $1,043,141 calculated using the Black-Scholes option pricing model, with inputs of: a risk-free interest rate of 3.73%, expected life of 1 year, dividend of 0% and volatility of 138.88%, which is accreted over 12 months. The bonus warrants are exercisable for a period of 12 months from issuance.

• e) Received $800,000 in non-interest bearing loans as at December 31, 2022 from Moonrider. Subsequent to the year ended December 31, 2022, the Company and Moonrider entered into a bridge loan facility for these at an interest rate of 12% (Note 15).

During the year ended December 31, 2021:

• a) The Company borrowed an unsecured short-term loan of $50,000 from Moonrider with a maturity date of August 24, 2021. The principal balance of loan payable bears an interest of 3% per annum. During the year ended December 31, 2022, $50,000 in principal and $1,845 in interest payable was settled by way of the DTP.

21

ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

9. LOANS PAYABLE (cont’d…)

During the year ended December 31, 2021: (cont’d…)

• b) The Company entered into a bridge loan facility (the “Third Facility”) with Moonrider, for $400,000. Pursuant to the Third Facility, the Company borrowed $400,000 from Moonrider at an interest rate of 12% per annum with a maturity date of August 4, 2021, then 20% per annum after maturity. In connection with the Third Facility, Moonrider was issued bonus warrants in February 2021 entitling it to acquire 1,600,000 common shares of the Company at a price of $0.25 per share. These bonus warrants had a fair value of $239,294 calculated using the Black-Scholes option pricing model, with inputs of: a risk-free interest rate of 0.24%, expected life of 1 year, dividend of 0% and volatility of 156.55%, which is accreted over 12 months. The bonus warrants are exercisable for a period of 12 months from issuance. During the year ended December 31, 2022, $400,000 in principal and $75,967 in interest payable was settled by way of the DTP.

• c) The Company entered into a bridge loan facility (the “Fourth Facility”) with Moonrider, for $1,000,000. Pursuant to the Fourth Facility, the Company borrowed $1,000,000 from Moonrider at an interest rate of 12% per annum with a maturity date of September 15, 2021, then 20% per annum after maturity. On July 14, 2022, Moonrider has agreed to extend the maturity date to June 30, 2023 at an interest rate of 12% per annum. In connection with the Fourth Facility, Moonrider was issued bonus warrants in March 2021 entitling it to acquire 4,255,319 common shares of the Company at a price of $0.235 per share. These bonus warrants had a fair value of $485,533 calculated using the Black-Scholes option pricing model, with inputs of: a risk-free interest rate of 0.24%, expected life of 1 year, dividend of 0% and volatility of 130.19%, which is accreted over 12 months. The bonus warrants are exercisable for a period of 12 months from issuance. During the year ended December 31, 2022, $483,168 in principal and $167,890 in interest payable was settled by way of the DTP.

• d) The Company entered into a bridge loan facility (the “Fifth Facility”) with Moonrider, for $2,000,000. Pursuant to the Fifth Facility, the Company borrowed $2,000,000 from Moonrider at an interest rate of 12% per annum with a maturity date of September 30, 2022, then 20% per annum after maturity. On July 14, 2022, Moonrider has agreed to extend the maturity date to June 30, 2023 at an interest rate of 12% per annum. In connection with the Fifth Facility, Moonrider was issued bonus warrants in March 2021 entitling it to acquire 8,510,638 common shares of the Company at a price of $0.235 per share. These bonus warrants had a fair value of $922,083 calculated using the Black-Scholes option pricing model, with inputs of: a risk-free interest rate of 0.23%, expected life of 1 year, dividend of 0% and volatility of 122.69%, which is accreted over 12 months. The bonus warrants are exercisable for a period of 12 months from issuance. During the year ended December 31, 2022, $318,685 in interest payable was settled by way of the DTP.

• e) The Company entered into a bridge loan facility (the “Sixth Facility”) with Moonrider, for $500,000. Pursuant to the Sixth Facility, the Company borrowed $500,000 from Moonrider at an interest rate of 12% per annum with a maturity date of April 26, 2022, then 20% per annum after maturity. On July 14, 2022, Moonrider has agreed to extend the maturity date to June 30, 2023 at an interest rate of 12% per annum. In connection with the Sixth Facility, Moonrider was issued bonus warrants in October 2021 entitling it to acquire 2,793,296 common shares of the Company at a price of $0.18 per share. These bonus warrants had a fair value of $150,046 calculated using the Black-Scholes option pricing model, with inputs of: a risk-free interest rate of 0.98%, expected life of 1 year, dividend of 0% and volatility of 76.16%, which is accreted over 12 months. The bonus warrants are exercisable for a period of 12 months from issuance. During the year ended December 31, 2022, $25,479 in interest payable was settled by way of the DTP.

22

ATON RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Financial assets and liabilities are classified in the fair value hierarchy according to the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect placement within the fair value hierarchy levels. The hierarchy is as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quotes prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The carrying values of prepayments and advances receivable, and accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments. The amortized cost of the loans payable approximates its fair value due to the market rate of interest attached to them, and the short-term nature of these instruments.

Cash is measured at FVTPL under level 1 of the fair value hierarchy.

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.

The Company is exposed to varying degrees to a variety of financial instrument related risks:

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge and obligation and cause the other party to incur a financial loss.

The Company’s cash (excluding nominal petty cash) is all held at large Canadian or International financial institutions in interest bearing accounts. The Company’s prepayments and advances receivable are entered with reputable counterparties. The Company has no investment in asset-backed commercial paper. As at December 31, 2022, management believes that the Company’s exposure to credit risk is not material. The maximum exposure to credit risk that the Company has is limited to the carrying values of cash and prepayments and advances receivable as presented in the consolidated statement of financial position. The Company’s exposure to and management of credit risk for the year ended December 31, 2022, has not changed materially from the year ended December 31, 2021.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

The Company manages liquidity risk through its capital management as outlined further below.

Accounts payable and accrued liabilities and loan payable are due within one year. The Company’s approach to managing liquidity risk is to try to have sufficient liquidity to meet liabilities when due. To maintain liquidity, the Company is currently investigating financing opportunities. While the Company has been successful in obtaining its required funding in the past, through the issuance of debt and equity instruments, there is no assurance that future financings will be available. The Company’s exposure to and management of liquidity risk for the year ended December 31, 2022, has not changed materially from the year ended December 31, 2021.

23

ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont’d…)

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk is comprised of three types of risks: interest rate risk, foreign currency risk, and price risk.

a) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. A 1% change in interest rates on cash deposits would have a nominal effect on net loss. The loans payable bear an interest rate of 12% per annum from closing date until repayment date. All amounts owed from the date on which such amount is due until such amount is paid in full, payable on demand, bears an interest rate of 20% per annum. The Company’s exposure to and management of interest rate risk for the year ended December 31, 2022, has not changed materially from the year ended December 31, 2021.

b) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s functional and presentation currency is the Canadian dollar. The Company is exposed to foreign currency risk on fluctuations related primarily to cash, prepayments and advances receivable, and accounts payable and accrued liabilities that are denominated in United States Dollar (USD) or the Egyptian Pound (EGP).

The Company has cash and accounts payable and accrued liabilities denominated in USD and the EGP and is exposed to risk from changes in the USD and EGP.

As at December 31, 2022, the Company’s foreign denominated financial assets and liabilities in USD and EGP are as follows:

		United States		Canadian Dollar
		Dollar ($)		equivalent
Cash	$	67,732	$	91,737
Prepayments and advances receivable	$	200,966	$	272,188
Accounts payable and accrued liabilities	$	(447,489)	$	(606,079)

		Egyptian	Canadian Dollar
		Pound (E£)	equivalent
Cash	E£	344,591 $	18,849
Prepayments and advances receivable	E£	162,194 $	8,872
Accounts payable and accrued liabilities	E£	(2,000,995) $	(109,454)

Based on the above net exposures, a 10% change in the Canadian Dollar to United States Dollar and Canadian Dollar to Egyptian Pound would change the Company’s comprehensive loss by approximately $24,215 and $8,173, respectively. As at December 31, 2022, the Company has not hedged its exposure to currency fluctuations. The Company assessed its financial currency risk as moderate as at December 31, 2022.

The Company’s exposure to and management of foreign currency risk for the year ended December 31, 2022, has not changed materially from the year ended December 31, 2021.

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ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont’d…)

Market risk (cont’d…)

c) Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or foreign currency risk). The Company had no held for sale investments, nor is the Company materially impacted by commodity prices as it is not yet in commercial production. As such, the Company is not materially exposed to other price risk. The Company’s exposure to and management of other price risk for the year ended December 31, 2022, has not changed materially from the year ended December 31, 2021.

Capital Management

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In the management of capital, the Company considers components of shareholders’ deficiency, which totalled $(7,419,783) at December 31, 2022 (2021 - $(5,018,278)). To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue debt, acquire or dispose of assets or adjust the amount of cash and investments.

In order to facilitate the management of its capital requirements, the Company prepares annual expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. The Company currently is not subject to externally imposed capital requirements. As at December 31, 2022, the Company is not subject to any externally imposed debt covenants. There were no changes in the Company’s approach to capital management during the year.

11. SEGMENTED INFORMATION

The Company operates in one reportable segment, being the exploration and evaluation of mineral properties. All of the Company’s equipment and mineral exploration concessions are located in Egypt.

12. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS

For the years ended December 31,		2022		2021
Interest paid	$	-	$	-
Taxes paid	$	-	$	-
Shares issuance in settlement of debt	$	-	$	116,349
Recognition of lease liability and right of use asset	$	-	$	84,117
Issuance of bonus warrants on loans payable	$	1,853,087	$	1,796,956
Exercise of warrants pursuant to direction to pay (Notes 7 and 9)	$	2,000,000	$	-

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ATON RESOURCES INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

13. COMMITMENTS AND CONTINGENCIES

A former director and CEO of the Company commenced litigation against the Company alleging wrongful dismissal and claiming damages of US$500,000 for severance and unpaid wages of $236,798 plus interest and related costs. The Company is defending the cases and believes they are without merit. No liability other than unpaid fees for services amounting to $253,386, included in accounts payable and accrued liabilities, has been recorded in relation to these legal proceedings.

Former employees of the Company commenced litigation against the Company in Egypt alleging wrongful dismissal and claiming damages up to $73,417 and a former vendor of the Company claiming fees and compensation of US$14,596. During the year ended December 31, 2019, the Company won its case but then had this overturned by the appellate court. The Company has filed an appeal in the Court of Cassation to overturn this appeal ruling. However, as the appellate court judgment is enforceable while it is adjudicated by the Court of Cassation, the Company recorded a legal provision of $73,417 (2021 - $71,901). No timeline has been provided with respect to when the judgment of the Court of Cassation will be rendered.

14. INCOME TAXES

A reconciliation of income taxes at statutory rates is as follows:

	2022 2021
Loss for the year before income tax $	(8,562,826) $ (4,625,231)
Expected income tax (recovery) $ Changes in statutory, foreign tax, foreign exchange rates and other Non-deductible costs Share issuance costs Adjusted to true-up provision from prior years Change in unrecognized deductible temporary differences Total income tax (recovery) $	(2,312,000) $ (1,249,000) 273,000 131,000 526,000 458,000 6,000 (13,000) 27,000 (6,000) 1,480,000 679,000 - $ -

Deductible temporary differences of the Company for which a deferred tax asset has not been recognized are as follows:

		2022		2021	Expiry Dates
Share issuance costs	$	22,000	$	33,000	2023 - 2046
Non-capital losses		12,121,000		10,634,000	2023 - 2042
Allowable capital losses		23,000		23,000	No expiry date
Exploration and evaluation assets		31,059,000		24,955,000	No expiry date

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ATON RESOURCES INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Presented in Canadian Dollars) December 31, 2022 and 2021

15. SUBSEQUENT EVENTS

Subsequent to December 31, 2022, the Company:

• a) Entered into a bridge loan facility (the “Eleventh Facility”) with Moonrider, a significant shareholder of the Company for $4,000,000. Pursuant to the Eleventh Facility, the Company borrowed $4,000,000 from Moonrider at an interest rate of 12% per annum with a maturity date of March 6, 2024, then 20% per annum after maturity. In connection with the Eleventh Facility, Moonrider was issued bonus warrants in March 2023 entitling it to acquire 20,000,000 common shares of the Company at a price of $0.20 per share. The bonus warrants are exercisable for a period of 12 months from issuance.

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