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Aton Resources Inc. Audit Report / Information 2024
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Audit Report / Information
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1
CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
bakertilly
Baker Tilly WM LLP
900 – 400 Burrard Street
Vancouver, British Columbia
Canada V6C 3B7
T: +1 604.684.6212
F: +1 604.688.3497
[email protected]
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 statements of financial position as at December 31, 2024 and 2023, and the consolidated statements of loss and comprehensive loss, consolidated statements of changes in shareholders' deficiency and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.
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, 2024 and 2023, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting 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 consolidated 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, 2024. 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.
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 IFRS Accounting 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.
- Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Company as a basis for forming an opinion on the group financial statements. We are responsible for the direction, supervision and review of the audit work performed for purposes 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.
Baker Tilly WM LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, B.C.
April 28, 2025
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ATON RESOURCES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian Dollars)
AS AT DECEMBER 31,
| 2024 | 2023 | |
|---|---|---|
| ASSETS | ||
| Current | ||
| Cash | $ 1,274,003 | $ 453,283 |
| Receivables | 11,895 | 2,311 |
| Prepayments and advances receivable (Note 5) | 124,527 | 134,986 |
| 1,410,425 | 590,580 | |
| Equipment (Note 4) | 261,085 | 234,110 |
| Mineral property interests (Note 5) | 203,251 | 1 |
| $ 1,874,761 | $ 824,691 | |
| LIABILITIES AND SHAREHOLDERS' DEFICIENCY | ||
| Current | ||
| Accounts payable and accrued liabilities (Notes 7 and 12) | $ 1,713,863 | $ 558,934 |
| Legal provision (Note 12) | 29,289 | 45,868 |
| Loans payable (Notes 7 and 8) | 9,625,585 | 10,213,453 |
| 11,368,737 | 10,818,255 | |
| Shareholders' deficiency | ||
| Share capital (Note 6) | 51,416,053 | 39,071,384 |
| Share-based payment reserve (Note 6) | 5,434,332 | 7,406,673 |
| Deficit | (66,344,361) | (56,471,621) |
| (9,493,976) | (9,993,564) | |
| $ 1,874,761 | $ 824,691 |
Nature of business and going concern (Note 1)
Commitments and contingencies (Note 12)
Subsequent event (Note 14)
Approved and authorized by the Board of Directors on April 28, 2025.
"Anthony Clements" Director "Tonno Vahk" Director
The accompanying notes are an integral part of these consolidated financial statements.
6
ATON RESOURCES INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31,
| 2024 | 2023 | |
|---|---|---|
| EXPENSES | ||
| Accretion expense (Note 8) | $ 495,081 | $ 2,743,644 |
| Depreciation (Note 4) | 59,428 | 83,947 |
| Exploration and evaluation expenditures (Note 5) | 7,352,249 | 5,373,242 |
| Finance expense (Note 8) | 731,065 | 1,125,051 |
| Foreign exchange | (2,466) | (19,678) |
| Investor relations | 145,153 | 34,337 |
| Management and consulting fees (Note 7) | 715,595 | 125,750 |
| Office and administration | 89,042 | 55,241 |
| Professional fees | 198,494 | 124,042 |
| Share based payments (Note 6) | 89,099 | 323,572 |
| Loss from operations | (9,872,740) | (9,969,148) |
| Recovery of legal provision (Note 12) | - | 26,355 |
| Loss and comprehensive loss for the year | $ (9,872,740) | $ (9,942,793) |
| Basic and diluted loss per common share | $ (0.08) | $ (0.16) |
| Weighted average number of common shares outstanding – basic and diluted | 117,574,618 | 61,008,397 |
The accompanying notes are an integral part of these consolidated financial statements.
ATON RESOURCES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31,
| 2024 | 2023 | |
|---|---|---|
| OPERATING ACTIVITIES | ||
| Loss for the year | $ (9,872,740) | $ (9,942,793) |
| Items not affecting cash: | ||
| Unrealized foreign exchange | (16,579) | (1,194) |
| Depreciation | 59,428 | 83,947 |
| Share based payments | 89,099 | 323,572 |
| Finance expense | 731,065 | 1,125,051 |
| Accretion expense | 495,081 | 2,743,644 |
| Recovery of legal provision | - | (26,355) |
| Changes in non-cash working capital items: | ||
| Receivables | (9,584) | 319 |
| Prepayments and advances receivable | 10,459 | 151,312 |
| Accounts payable and accrued liabilities | 1,154,929 | (269,186) |
| Net cash used in operating activities | (7,358,842) | (5,811,683) |
| INVESTING ACTIVITIES | ||
| Mineral property interests | (203,250) | - |
| Purchase of equipment | (86,403) | (35,585) |
| Net cash used in investing activities | (289,653) | (35,585) |
| FINANCING ACTIVITIES | ||
| Private placement | - | 3,000,000 |
| Exercise of warrants | 1,500,000 | - |
| Share issuance costs | (30,785) | (16,000) |
| Loan proceeds | 7,000,000 | 3,200,000 |
| Net cash provided by financing activities | 8,469,215 | 6,184,000 |
| Change in cash during the year | 820,720 | 336,732 |
| Cash, beginning of year | 453,283 | 116,551 |
| Cash, end of year | $ 1,274,003 | $ 453,283 |
Supplemental disclosures with respect to cash flows (Note 11)
The accompanying notes are an integral part of these consolidated financial statements.
7
ATON RESOURCES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY
(Expressed in Canadian Dollars)
| Share capital | Share-based payment reserve | Deficit | Total | ||
|---|---|---|---|---|---|
| Number | Amount | ||||
| Balance at December 31, 2022 | 56,027,077 | $ 33,044,243 | $ 6,064,802 | $ (46,528,828) | $ (7,419,783) |
| Private placement | 13,636,364 | 3,000,000 | - | - | 3,000,000 |
| Share issuance costs | - | (16,000) | - | - | (16,000) |
| Warrants exercised | 9,090,909 | 3,043,141 | (1,043,141) | - | 2,000,000 |
| Issuance of bonus warrants | - | - | 2,061,440 | - | 2,061,440 |
| Share based payments | - | - | 323,572 | - | 323,572 |
| Loss for the year | - | - | - | (9,942,793) | (9,942,793) |
| Balance at December 31, 2023 | 78,754,350 | 39,071,384 | 7,406,673 | (56,471,621) | (9,993,564) |
| Debt settlement (Notes 6 and 8) | 28,700,063 | 6,314,014 | - | - | 6,314,014 |
| Share issuance costs | - | (30,785) | - | - | (30,785) |
| Warrants exercised | 20,000,000 | 6,061,440 | (2,061,440) | - | 4,000,000 |
| Share based payments | - | - | 89,099 | - | 89,099 |
| Loss for the year | - | - | - | (9,872,740) | (9,872,740) |
| Balance at December 31, 2024 | 127,454,413 | $ 51,416,053 | $ 5,434,332 | $ (66,344,361) | $ (9,493,976) |
The accompanying notes are an integral part of these consolidated financial statements.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
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 “Egypt”). 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, 2024, the Company has a deficit of $66,344,361 (2023 - $56,471,621) and a working capital deficit of $9,958,312 (2023 - $10,227,675). These conditions create a material uncertainty that may cast significant doubt upon the Company’s ability to continue as a going concern. The consolidated 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.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
2. BASIS OF PREPARATION
Statement of Compliance
These consolidated financial statements have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IASB”). These consolidated financial statements were authorized for issuance by the Board of Directors on April 28, 2025.
Basis of Consolidation
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:
| Name of Subsidiary | Country of incorporation | Ownership Interest |
|---|---|---|
| Aton Mining Inc. | Canada | 100% |
| Abu Marawat Gold Mines (“AMGM”) | Egypt | 50% |
AMGM was incorporated on September 17, 2024. AMGM is 50% owned by the Egyptian Mineral Resources Authority (“EMRA”). The Company and EMRA have equal voting and management rights over AMGM; however, the Company is considered to have control over the entity and consolidates AMGM (note 3).
3. MATERIAL ACCOUNTING POLICIES
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
The valuation of share-based payments, including bonus warrants, involves significant estimation. Both the share-based payments and the bonus warrants are valued using the Black-Scholes option pricing model. The option pricing model requires the input of highly subjective assumptions including the expected share price volatility.
Although the same model is applied to both, the bonus warrants may have specific characteristics that different from stock options, such as different vesting conditions or exercise features. These characteristics could require adjustments to the inputs or assumptions used in the model. Therefore, while the valuation process for bonus warrants is consistent with that of share-based payments, the assumptions used in the Black-Scholes model may vary, leading to potential differences in the final fair value calculation.
As such, the valuation of bonus warrants is subject to its own set of estimation uncertainties, even though it follows the same pricing model as the share-based payments.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
3. MATERIAL ACCOUNTING POLICIES (cont'd...)
Critical Accounting Judgments
Functional currency
Management has made judgments regarding the functional currency of the Company and has determined that the functional currency of the Company is the Canadian dollar.
Recoverability of mineral properties
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.
Control over other entities
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. Where the Company does not have a majority of voting rights, an assessment is made to evaluate other factors and conditions that influence the Company’s power over an investee. Factors include voting rights, contractual arrangements, board representation, decision-making authority and operational influence. The Company has determined it has power in addition to its voting rights over AMGM related to AMGM’s reliance on the Company for funding a significant portion of its operations.
Basis of Measurement
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 statement. All dollar amounts presented are in Canadian dollars unless otherwise specified.
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.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
3. MATERIAL ACCOUNTING POLICIES (cont'd...)
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 | FVTPL |
| Accounts payable and accrued liabilities | Amortized cost |
| Loans payable | Amortized cost |
FVTPL – financial assets and liabilities are classified as FVTPL 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.
FVTOCI – Financial assets held to achieve a particular business objective other than short-term trading are designated at FVTOCI. 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 FVTOCI. 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.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
3. MATERIAL 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.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
3. MATERIAL 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.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
3. MATERIAL 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 flow to the Company and the expenditure can be measured reliably. All other subsequent expenditure is recognized as repairs and maintenance during the period in which it is incurred.
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.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
3. MATERIAL 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 share-based 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.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
3. MATERIAL 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.
New accounting standards issued and adopted in the current period and Recent accounting pronouncements not yet adopted
New Standards Adopted in the Current Year
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after January 1, 2024 and have been adopted in preparing these consolidated financial statements. Their adoption has not had a material impact on disclosures or amounts reported in these consolidated financial statements.
Amendments to IAS 1 - Presentation of Financial Statements
In October 2022, the IASB issued amendments to IAS 1, Presentation of Financial Statements titled non-current liabilities with covenants. These amendments sought to improve the information that an entity provides when its right to defer settlement of a liability is subject to compliance with covenants within 12 months after the reporting period. These amendments to IAS 1 override but incorporate the previous amendments, Classification of liabilities as current or noncurrent, issued in January 2020, which clarified that liabilities are classified as either current or non-current depending on the rights that exist at the end of the reporting period. Liabilities should be classified as non-current if an entity has a substantive right to defer settlement for at least 12 months at the end of the reporting period.
Amendments to IAS 7 and IFRS 7 - Supplier Finance Arrangements
In May 2023, the IASB issued amendments to IAS 7, Statement of Cash Flows and IFRS 7, Financial Instruments Disclosures to provide guidance on disclosures related to supplier finance arrangements that enable users of financial statements to assess the effects of these arrangements on the entity's liabilities and cash flows and on the entity's exposure to liquidity risk.
Recent Accounting Pronouncements not yet Adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after January 1, 2025, and have not been early adopted in preparing these consolidated financial statements.
IFRS 9 Financial Instruments ("IFRS 9") and IFRS 7, Financial Instruments: Disclosures ("IFRS 7")
IFRS 9 requires entities to recognize financial assets and liabilities when they become party to the contractual terms and to measure them initially at fair value, adjusted for directly attributable transaction costs where applicable. The standard is being clarified to provide better guidance on the derecognition of financial liabilities, which can impact bank reconciliation processes, especially during debt restructuring based on the timing of payments on financial liabilities as compared to the actual settlement of those debts. This clarification may result in a change in the derecognition timing of financial liabilities in situations where electronic payments are involved. These amendments are effective for annual periods beginning on or after January 1, 2026 with earlier adoption permitted.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
3. MATERIAL ACCOUNTING POLICIES (cont'd...)
New accounting standards issued and adopted in the current period and Recent accounting pronouncements not yet adopted (cont'd...)
IFRS 18 Presentation and Disclosure in Financial Statements
In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements. This standard aims to improve the consistency and clarity of financial statement presentation and disclosures by providing updated guidance on the structure and content of financial statements. Key changes include enhanced requirements for the presentation of financial performance, financial position, and cash flows, as well as additional disclosures to improve transparency and comparability. In addition, IFRS 18 requires entities to classify income and expenses into five categories, three of which are new – i.e. operating, investing and financing – and the income tax and discontinued operation categories. The new standard sets out detailed requirements for classifying income and expenses into each category. These amendments are effective for annual periods beginning on or after January 1, 2027 with earlier adoption permitted. IFRS 18 requires retroactive application with certain transition provisions.
Annual Improvements to IFRS Accounting Standards
In July 2024, the IASB issued Annual Improvements to IFRS Accounting Standards – Volume 11, which contains amendments to Hedge Accounting by a First-time Adopter (Amendments to IFRS 1), Gain or Loss on Derecognition (Amendments to IFRS 7), Disclosure of Deferred Difference between Fair Value and Transaction Price (Amendments to Guidance on implementing IFRS 7), Determination of a 'De Facto Agent' (Amendments to IFRS 10), Derecognition of Lease Liabilities (Amendments to IFRS 9) and Cost Method (Amendments to IAS 7). The amendments are effective for annual reporting periods beginning on or after January 1, 2026. The extent of the impact of the amendments on the Company's consolidated financial statements has not yet been determined.
4. EQUIPMENT
| Field and office equipment | Vehicles and field accommodations | Total | |
|---|---|---|---|
| Cost | |||
| Balance, December 31, 2022 | $ 466,194 | $ 592,613 | $ 1,058,807 |
| Additions for the year | - | 35,585 | 35,585 |
| Balance, December 31, 2023 | 466,194 | 628,198 | 1,094,392 |
| Additions for the year | - | 86,403 | 86,403 |
| Balance, December 31, 2024 | $ 466,194 | $ 714,601 | $ 1,180,795 |
| Accumulated depreciation | |||
| Balance, December 31, 2022 | $ 332,540 | $ 443,795 | $ 776,335 |
| Depreciation for the year | 32,784 | 51,163 | 83,947 |
| Balance, December 31, 2023 | 365,324 | 494,958 | 860,282 |
| Depreciation for the year | 20,174 | 39,254 | 59,428 |
| Balance, December 31, 2024 | $ 385,498 | $ 534,212 | $ 919,710 |
| Carrying amounts | |||
| As at December 31, 2023 | $ 100,870 | $ 133,240 | $ 234,110 |
| As at December 31, 2024 | $ 80,696 | $ 180,389 | $ 261,085 |
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
5. MINERAL PROPERTY INTERESTS
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.
On January 8, 2024, the existence of Commercial Discoveries at both Hamama West and Rodruin was agreed by EMRA. On January 17, 2024, the mining exploitation lease was established and issued. The Abu Marawat exploitation lease is for an initial 20 year period, and renewable for a further 10 years. The Company also agreed with EMRA the areas that will be retained for further exploration for a period of up to 4 years. Concurrent with the establishment of the exploitation lease, the Company paid a $203,250 (US$150,000) bonus payment, in accordance with the terms of the Abu Marawat Concession Agreement. The Company is required to pay annual rent to EMRA equal to US$1,000/square kilometre on the retained exploration areas, which cover a total of 255 square kilometres. During the year ended December 31, 2024, the Company has incurred $349,352 (US$255,040) (2023 - $nil) in rent. AMGM was incorporated on September 17, 2024. AMGM is 50% owned by EMRA. The Company and EMRA have equal voting and management rights over AMGM; however, the Company is considered to have control over the entity and consolidates AMGM.
During the year ended December 31, 2021, the Company had advanced a deposit of $253,560 (US$200,000) on the Abu Marawat project, of which $99,195 (US$75,000) remains in prepayments and advances receivable during the year ended December 31, 2024.
Cumulative exploration and evaluation expenditures are as follows:
| As at December 31, 2022 | Additions | As at December 31, 2023 | Additions | As at December 31, 2024 | |
|---|---|---|---|---|---|
| Administration | $ 2,322,759 | $ 278,884 | $ 2,601,643 | $ 449,602 | $ 3,051,245 |
| Assaying | 2,682,614 | 502,112 | 3,184,726 | 197,332 | 3,382,058 |
| Camp upgrade | 96,954 | - | 96,954 | - | 96,954 |
| Concession access | 163,392 | - | 163,392 | - | 163,392 |
| Consulting | 3,676,984 | 252,547 | 3,929,531 | 329,229 | 4,258,760 |
| Drilling | 7,933,537 | 2,399,146 | 10,332,683 | 3,324,385 | 13,657,068 |
| Field costs | 3,994,338 | 694,819 | 4,689,157 | 1,132,719 | 5,821,876 |
| Geological services | 2,154,208 | 371,051 | 2,525,259 | 770,414 | 3,295,673 |
| Geophysics | 625,198 | 845 | 626,043 | - | 626,043 |
| Labour | 5,128,934 | 812,224 | 5,941,158 | 701,721 | 6,642,879 |
| Mapping | 6,429 | - | 6,429 | - | 6,429 |
| Mobilization | 217,292 | - | 217,292 | - | 217,292 |
| Rent | - | - | - | 349,352 | 349,352 |
| Travel | 804,512 | 61,614 | 866,126 | 97,495 | 963,621 |
| Start-up | 41,515 | - | 41,515 | - | 41,515 |
| $ 29,848,666 | $ 5,373,242 | $ 35,221,908 | $ 7,352,249 | $ 42,574,157 |
During the year ended December 31, 2024, $1,074,093 (2023 - $nil) of the exploration and evaluation expenditures were incurred in the exploration stage of the Abu Marawat exploitation lease.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
6. 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, 2024, the Company had 127,454,413 common shares issued and outstanding.
Share issuances
During the year ended December 31, 2024, the Company:
a) Issued 20,000,000 common shares on the exercise of warrants for an aggregate of $4,000,000. 7,500,000 warrants were exercised in cash for $1,500,000 and the remaining 12,500,000 were applied under a direction to pay (“DTP”) provided by OU Moonrider (“Moonrider”) (Note 8).
b) Finalized a debt settlement with Moonrider for a total of $6,314,014 of the loans payable in exchange for 28,700,063 shares at a price of $0.22 per common share (Note 8). Share issue costs of $30,785 were incurred in conjunction with the debt settlement.
During the year ended December 31, 2023, the Company:
a) Issued 9,090,909 common shares on the exercise of warrants for an aggregate of $2,000,000. The warrants were exercised under a DTP provided by OU Moonrider (“Moonrider”) (Note 8).
b) Completed a non-brokered private placement by issuing 13,636,364 common shares priced at $0.22 per share for gross proceeds of $3,000,000, less share issuance costs of $16,000.
Stock options and warrants
Stock option and warrant transactions are summarized as follows:
| Options | Warrants | |||
|---|---|---|---|---|
| Number of Shares | Weighted Average Exercise Price | Number of Shares | Weighted Average Exercise Price | |
| Balance, December 31, 2022 | 3,599,500 | $ 0.50 | 24,121,630 | $ 0.33 |
| Cancelled/Expired | (899,500) | 0.50 | (15,030,721) | 0.40 |
| Exercised | - | - | (9,090,909) | 0.22 |
| Granted | 300,000 | 0.205 | 20,000,000 | 0.20 |
| Balance, December 31, 2023 | 3,000,000 | $ 0.21 | 20,000,000 | $ 0.20 |
| Exercised | - | - | (20,000,000) | 0.20 |
| Granted | 300,000 | 0.285 | - | - |
| Balance, December 31, 2024 | 3,300,000 | $ 0.22 | - | $ - |
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
6. SHARE CAPITAL AND SHARE-BASED PAYMENT RESERVE (cont'd...)
Stock options outstanding
The following incentive stock options were outstanding at December 31, 2024:
| Number outstanding | Number exercisable | Exercise price | Expiry date | |
|---|---|---|---|---|
| Stock Options | 2,700,000 | 2,700,000 | $ 0.21 | September 28, 2027 |
| 300,000 | 300,000 | $ 0.205 | August 2, 2028 | |
| 300,000 | 225,000 | $ 0.285 | February 4, 2029 | |
| 3,300,000 | 3,225,000 |
Stock warrants outstanding
As at December 31, 2024, the Company had no stock warrants outstanding.
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, 2024, the Company granted 300,000 (2023 - 300,000) options with an exercise price of $0.285 (2023 - $0.205) and weighted average fair value of $0.24 (2023 - $0.20) per option. In the year ended December 31, 2024, the Company recognized share-based payments expense of $89,099 (2023 - $323,572) for options vesting in the period.
The following weighted average assumptions were used for the valuation of stock options granted in the respective years:
| December 31, 2024 | December 31, 2023 | |
|---|---|---|
| Risk-free interest rate | 3.48% | 3.97% |
| Expected life of options | 5 years | 5 years |
| Annualized volatility | 125.51% | 178.76% |
| Dividend rate | 0.00% | 0.00% |
| Forfeiture rate | 0.00% | 0.00% |
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
7. 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. The remuneration of directors and management including the CEO and CFO were as follows:
| For the years ended December 31 | ||
|---|---|---|
| 2024 | 2023 | |
| Directors’ fees | $ 45,000 | $ 45,000 |
| Management and consulting fees | 75,000 | 59,000 |
| $ 120,000 | $ 104,000 |
As at December 31, 2024, the balances due to the Company's directors and officers included in accounts payable and accrued liabilities were $2,361 (2023 - $976). These amounts are unsecured, non-interest bearing and payable on demand.
During the year ended December 31, 2024, the Company recognized share-based payments expense of $nil (2023 - $90,000) related to the fair value of stock options granted and vested to key management personnel.
Loans payable are due to Moonrider, a shareholder owning approximately 70% (2023 - 52%) of the Company's common shares at December 31, 2024 (a "significant shareholder"), who has significant influence over the Company. Transactions with Moonrider are detailed in notes 6 and 8.
8. 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, 2024 | December 31, 2023 | |
|---|---|---|
| Balance – beginning of year | $ 10,213,453 | $ 7,206,198 |
| Advances of loans | 7,000,000 | 3,200,000 |
| Loan and interest repayment | (8,814,014) | (2,000,000) |
| Interest accrued – finance expense | 731,065 | 1,125,051 |
| Issuance of bonus warrants on loans payable | - | (2,061,440) |
| Accretion expense | 495,081 | 2,743,644 |
| $ 9,625,585 | $ 10,213,453 |
During the year ended December 31, 2023, the Company settled an aggregate of $2,000,000 in loans pursuant to a DTP issued by Moonrider for the exercise of 9,090,909 warrants (Note 6). The funds were applied against $2,000,000 in principal repayments. The funds were applied against the oldest outstanding facilities in the year ended December 31, 2023.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
8. LOANS PAYABLE (cont'd...)
During the year ended December 31, 2024, the Company settled an aggregate of $2,500,000 in loans pursuant to a DTP issued by Moonrider for the exercise of 12,500,000 warrants (Note 6). The funds were applied against $2,018,685 in principal repayments and $481,315 in interest repayments. The funds were applied against the Eleventh Facility in the year ended December 31, 2024.
During the year ended December 31, 2024, the Company finalized a debt settlement with Moonrider for a total of $6,314,014 of the loans payable in exchange for 28,700,063 shares at a price of $0.22 per common share (Note 6).
During the year ended December 31, 2024, the Company:
a) Entered into a bridge loan facility (the "Twelfth Facility") with Moonrider, whereby the Company may borrow up to $10,000,000 from Moonrider, from a series of advances. Each advance made under the Twelfth Facility is repayable on the earlier of 12 months from each advance transfer from Moonrider to the corporation or on the occurrence of various standard events of default. Any funds received from any other debt or equity financings in the corporation in excess of $5,000,000 will be applied to the repayment of the loan. The loan will bear interest at an interest rate of 12% per annum, then 20% per annum after maturity. As at December 31, 2024, the Company has received advances of $7,000,000 from the Twelfth Facility. Subsequent to the year ended December 31, 2024, the Company received an additional $3,800,000 from the Twelfth Facility, which is now in excess of the agreed limit. Moonrider has not raised any objection or requested an amendment.
During the year ended December 31, 2023, the Company:
a) Entered into a bridge loan facility (the "Eleventh Facility") with Moonrider, 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. These bonus warrants had a fair value of $2,061,440 calculated using the Black-Scholes option pricing model, with inputs of: a risk-free interest rate of 4.22%, expected life of 1 year, dividend of 0% and volatility of 136.47%, 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, 2024, $2,018,685 in principal repayments and $481,315 in interest payable was settled by way of a DTP.
9. 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 quoted 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 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.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd...)
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 an 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. The Company’s advances receivable are entered with reputable counterparties. The Company has no investment in asset-backed commercial paper. As at December 31, 2024, 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 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, 2024, has not changed materially from the year ended December 31, 2023.
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, 2024, has not changed materially from the year ended December 31, 2023.
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, currency risk, and other 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, 2024, has not changed materially from the year ended December 31, 2023.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd...)
Market risk (cont'd...)
b) Currency risk
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 currency risk on fluctuations related primarily to cash, advances receivable, and accounts payable and accrued liabilities that are denominated in the United States Dollar (USD) or the Egyptian Pound (EGP).
The Company has cash and accounts payable and accrued liabilities denominated in the USD and the EGP and is exposed to risk from changes in the USD and EGP.
As at December 31, 2024, the Company's foreign denominated financial assets and liabilities in USD and EGP are as follows:
| United States Dollar ($) | Canadian Dollar equivalent | ||
|---|---|---|---|
| Cash | $ | 663,258 | $ 954,362 |
| Advances receivable | $ | 75,000 | $ 107,918 |
| Accounts payable and accrued liabilities | $ | (648,082) | $ (932,525) |
| Egyptian Pound (E£) | Canadian Dollar equivalent | ||
| Cash | E£ | 1,251,856 | $ 35,337 |
| Advances receivable | E£ | 171,638 | $ 4,845 |
| Accounts payable and accrued liabilities | E£ | (4,375,301) | $ (123,506) |
Based on the above net exposures, a 10% change in the Canadian Dollar to United States Dollar would change the Company's comprehensive income by approximately $12,975 and Canadian Dollar to Egyptian Pound would change the Company's comprehensive loss by approximately $8,332. As at December 31, 2024, the Company has not hedged its exposure to currency fluctuations. The Company assessed its currency risk as moderate as at December 31, 2024.
The Company's net exposure to and management of currency risk for the year ended December 31, 2024, has not changed materially from the year ended December 31, 2023.
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, 2024, has not changed materially from the year ended December 31, 2023.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont'd...)
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 $9,493,976 (2023 - $9,993,564) at December 31, 2024. 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, 2024, 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.
10. 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 property interests are located in Egypt.
11. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS
| For the years ended December 31, | 2024 | 2023 |
|---|---|---|
| Interest paid | $ - | $ - |
| Taxes paid | $ - | $ - |
| Issuance of bonus warrants on loans payable | $ - | $ 2,061,440 |
| Fair value of warrants reclassified to reserves on exercise | $ - | $ 1,043,141 |
| Debt settlement (Notes 6 and 8) | $ 6,314,014 | $ - |
| Exercise of warrants pursuant to direction to pay (Notes 6 and 8) | $ 2,500,000 | $ 2,000,000 |
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
12. 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 it is without merit. No liability other than unpaid fees for services amounting to $254,946, which are included in accounts payable and accrued liabilities, has been recorded in relation to the legal proceedings.
A former employee of the Company commenced litigation against the Company in Egypt alleging wrongful dismissal and claiming damages up to £730,000 ($20,662), the Company filed a counterclaim of £500,000. During the year ended December 31, 2020, the Court of Appeal decided upon the employee's entitlement and dismissed the Company's counterclaim. The Company filed a challenge before the Court of Cassation to overturn this appeal ruling. During the year ended December 31, 2021, the Court of Cassation decided upon accepting the Company's challenge by cancelling the Court of Appeal's judgment and returning the case to the Court of Appeal to re-review the case. During the year ended December 31, 2023, the Court of Appeal decided upon the employee's entitlement to receive £730,000 from the Company and dismissed all other claims. During the year ended December 31, 2024, the Company filed a challenge before the Court of Cassation. Subsequent to the year ended December 31, 2024, the Court of Cassation issued its judgment to suspend the enforcement initiated by the employee and scheduled a hearing to review the merits of the challenge. The Company has recorded this claim as a legal provision within current liabilities.
A former employee of the Company commenced litigation against the Company in Egypt alleging wrongful dismissal and claiming damages up to £446,075, the Company filed a counterclaim of £500,000. During the year ended December 31, 2019, the Court of Appeal decided upon the employee's entitlement and dismissed the Company's counterclaim. The Company filed a challenge before the Court of Cassation to overturn this appeal ruling. During the year ended December 31, 2021, the Court of Cassation has accepted the Company's challenge and decided upon final dismissal of the former employee's compensation claim and cancelled the compensation that was granted by the Court of Appeal. However, it confirmed the employees' entitlement of £38,541. During the year ended December 31, 2024, the Company settled and closed the claim of the former employee.
A former vendor of the Company claimed fees of £304,796 ($8,627), which the Company appealed. During the year ended December 31, 2021, it was rejected by the Court of Appeal. The Company challenged the judgment before the Supreme Administrative Court. During the year ended December 31, 2023, the Court referred the case to the expert committee, a hearing has been scheduled for May 3, 2025. The Company has recorded this claim as a legal provision within current liabilities.
During the year ended December 31, 2024, the Company recorded a legal provision of $29,289 (2023 - $45,868). The variance from the year ended December 31, 2023 to the year ended December 31, 2024 is primarily due to foreign exchange.
ATON RESOURCES INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
13. INCOME TAXES
A reconciliation of income taxes at statutory rates is as follows:
| 2024 | 2023 | |
|---|---|---|
| Loss for the year before income tax | $ (9,872,740) | $ (9,942,793) |
| Statutory income tax rate | 27.00% | 27.00% |
| Expected income tax (recovery) | $ (2,666,000) | $ (2,685,000) |
| Changes in statutory, foreign tax, foreign exchange rates and other | (214,000) | 326,000 |
| Non-deductible costs | 559,000 | 622,000 |
| Share issuance costs | 4,000 | 4,000 |
| Adjusted to true-up provision from prior years | 96,000 | (3,000) |
| Change in unrecognized deductible temporary differences | 2,221,000 | 1,736,000 |
| Total income tax (recovery) | $ - | $ - |
Deductible temporary differences of the Company for which a deferred tax asset has not been recognized are as follows:
| 2024 | 2023 | Expiry Dates | |
|---|---|---|---|
| Share issuance costs | $ 15,000 | $ 15,000 | 2025 - 2029 |
| Non-capital losses | 15,234,000 | 13,625,000 | 2025 - 2044 |
| Allowable capital losses | 23,000 | 23,000 | No expiry date |
| Exploration and evaluation assets | 43,784,000 | 36,432,000 | No expiry date |
14. SUBSEQUENT EVENT
Subsequent to December 31, 2024, the Company received an additional $3,800,000 from the Twelfth Facility, which is now in excess of the agreed limit. Moonrider has not raised any objection or requested an amendment (Note 8).
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