Gratomic Inc. — Interim / Quarterly Report 2024

Nov 28, 2024

Gratomic

GRATOMIC INC.
INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023
(Expressed in Canadian Dollars)

The accompanying interim unaudited condensed consolidated financial statements for Gratomic Inc. have been prepared by management in accordance with International Financial Reporting Standards consistently applied. These interim unaudited condensed consolidated financial statements are unaudited and have not been reviewed by the Company's auditors.

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GRATOMIC INC.
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
Expressed in Canadian Dollars

	Notes	September 30, 2024	December 31, 2023
Assets		$	$
Current
Cash		( 2,350)	52,424
Amounts receivable	3	1,643	406,396
Prepaids		-	121,257
		( 707)	580,077
Exploration and evaluation assets	4	14,227,005	14,215,005
Long term prepaids		-	35,465
Property and equipment	5	12,901,459	12,623,105
		27,127,757	27,453,652
Liabilities
Current
Amounts payable and accrued liabilities	9	4,881,267	3,945,178
Notes payable	6	1,612,140	1,058,580
		6,493,407	5,003,758
Long Term
Decommissioning liability	7	608,706	583,331
Total liabilities		7,102,113	5,587,089
Shareholders' equity
Share capital	8	92,679,885	92,679,885
Reserves		19,771,841	19,771,841
Deficit		(92,426,082)	(90,585,163)
Total equity		20,025,644	21,866,563
Total shareholders' equity and liabilities		27,127,757	27,453,652
Nature of operations and going concern	1
Commitments and contingencies	13
"Arno Brand"		"Daniel Baard"
Director		Director

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

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

GRATOMIC INC.

INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF LOSS AMD

COMPREHENSIVE LOSS FOR THE THREE- AND NINE MONTHS ENDED

SEPTEMBER 30, 2024, AND 2023

(Expressed in Canadian Dollars)

	9 months ended: 30/09/2024 CAD	3 months movement to: 30/09/2024 CAD	6 months ended: 30/06/2024 CAD	9 months ended: 30/09/2023 CAD	3 months movement to: 30/09/2023 CAD	3 months ended: 30/06/2023 CAD	Yearend 31/12/2023 CAD
Operating Expenses
Consulting	351 005	37 500	313 505	199 442	47 997	151 445	283 904
Depreciation	-	-	-	-	-	-	-
Filing fees and Permits	36 011	20 921	15 090	21 445	13 590	7 855	24 495
Management fees	413 156	200 250	212 906	129 800	32 287	97 513	155 001
Marketing	287 116	24 000	263 116	201 651	11 220	190 431	262 443
Office and other	304 597	31 318	273 279	222 012	88 897	133 115	246 260
Professional fees	266 949	109 800	157 149	88 740	36 072	52 668	112 131
Share-based compensation	-	-	-	-	-	-	-
Travel, meals and accomodation	131 258	-	131 258	44 641	15 629	29 012	49 510
Project Investigation fees	79 265	37 800	41 465	39 078	6 946	32 132	55 863
Net loss before the following	- 1 869 357	- 461 590	- 1 407 767	- 946 809	- 252 638	- 694 171	- 1 189 607
Interest	- 7 907	-	- 7 907	-	-	-	-
Profit on sale of fixed assets	36 344	-	36 344	-	-	-	-
Net loss and comprehensive loss for the period	- 1 840 919	- 461 590	- 1 379 330	- 946 809	- 252 638	- 694 171	- 1 189 607
Basic and diluted loss per share	-	-	-	-	-	-	-
Weighted average number of shares outstanding	200 260 817	200 260 817	200 260 817	200 260 817	200 260 817	200 260 818	200 260 817

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GRATOMIC INC.

INTERIM UNAUDITED CONSENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

Expressed in Canadian Dollars

	2024	2023
	$	$
Operating Activities
Net loss for the period	(1,840,919)	(1,189,607)
Non-cash items:
Depreciation	19,428	-
Change in receivables	404,753	469,811
Change in prepaid expenses	121,257	(187,630)
Change in accounts payable and accrued liabilities	1,489,649	(1,098,785)
Cash produced from (used for) operating activities	194,168	(2,006,211)
Investing Activities
Exploration and evaluation expenditures	(12,000)	(31,139)
Long term prepaids	35,465	13,430
Purchase of property and equipment	(260,504)	(318,837)
Proceeds on sale of fixed assets	(37,278)	-
Decommissioning Liability	25,375	(24,331)
Cash produced from / (used for) investing activities	(248,942)	(360,877)
Financing Activities
Proceeds (settlement) of loans payable	-	(251,679)
Proceeds from issuance of common shares from private placements	-	2,562,971
Share issuance costs - cash	-	(31,260)
Cash provided by financing activities	-	2,280,032
Increase / (Decrease) in cash	(54,774)	(87,056)
Cash, beginning of period	52,424	139,480
Cash, end of period	(2,350)	52,424
Supplemental information
Non-cash transactions	$	$
Amortization included in property and equipment	19,428	26,726

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

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GRATOMIC INC.

INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

| | Number of shares

| Shares to be issued

CAD | Share capital
CAD | Share-based payment reserve
CAD | Deficit
CAD | Total equity
CAD |
| --- | --- | --- | --- | --- | --- | --- |
| December 31st, 2022 | 184 918 519 | 488 010 | 88 590 565 | 19 308 280 | - 85 274 911 | 23 111 944 |
| Share issued on private placements | 8 543 235 | - | 2 562 971 | - | - | 2 562 971 |
| Private placements from warranties | - | - | 381 699 | 381 699 | - | - |
| Private placement share issue cost | - | - | 31 260 | - | - | 31 260 |
| Share reserves for issuances that were issued | 1 626 700 | 488 010 | 488 010 | - | - | - |
| Net loss for the period | - | - | - | - | 1 189 607 | 1 189 607 |
| March 31, 2023 | 195 088 454 | - | 91 228 587 | 19 689 979 | - 86 464 518 | 24 454 048 |
| December 31, 2023 | 200 260 817 | - | 92 679 885 | 19 771 841 | - 90 585 163 | 21 866 563 |
| Share issued on private placements | - | - | - | - | - | - |
| Private placements from warranties | - | - | - | - | - | - |
| Private placement share issue cost | - | - | - | - | - | - |
| Share reserves for issuances that were issued | - | - | - | - | - | - |
| Net loss for the period | - | - | - | - | 1 840 919 | 1 840 919 |
| September 30, 2024 | 200 260 817 | - | 92 679 885 | 19 771 841 | - 92 426 082 | 20 025 644 |

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

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GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

1. NATURE OF OPERATIONS AND GOING CONCERN

Gratomic Inc. (hereafter the “Company”) is incorporated under the Business Corporations Act (Ontario), and is listed on the TSX Venture Exchange, OTCQX and Frankfurt exchanges (TSX-V: GRAT) (OTCQX: CBULF) (FRANKFURT: CB82). The Company’s corporate office is located at Bay Adelaide Centre - East Tower, 22 Adelaide Street West, Suite 3600, Toronto, Ontario M5H 4E3. The Company is a junior exploration company engaged in the acquisition, exploration and development of mineral properties in Namibia, Brazil, and Canada.

The Company’s ability to realize the costs it has incurred to date on its properties is dependent upon it being able to identify economically recoverable reserves; to finance their exploration and evaluation costs; to resolve any environmental, regulatory, or other constraints which may hinder the successful development of the reserves; and to attain profitable operations.

The business of mining and exploration for minerals involves a high degree of risk and there can be no assurance that current exploration and development programs will result in profitable mining operations. The recoverability of the carrying value of exploration and evaluation assets and 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.

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

These interim unaudited condensed consolidated financial statements have been prepared using accounting policies applicable to a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business as they become due. The Company has incurred a loss for the six months ended September 30, 2024, of $1,840,919 and has an accumulated deficit of $92,426,082. The Company is a junior mining company and is subject to risks and challenges similar to other companies at a comparable stage. These risks include, but are not limited to, dependence on key individuals, investment risks, market risks, and the ability to maintain adequate cash flows, and continuing as a going concern. Cash on hand is currently not adequate to cover supplier obligations and the anticipated expenditures for the next 12-months, and therefore the Company will be required to secure additional funding. These risks, in particular the current challenging capital markets for junior resources companies, and the continued cumulative operating losses indicate the existence of material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern. These consolidated statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts or classification of liabilities that might be necessary should the Company not be able to continue as a going concern. Such adjustments can be material.

The interim unaudited condensed consolidated financial statements of the Company for the nine months ended September 30, 2024, and 2023, were authorized for issuance in accordance with a resolution of the Board of Directors on November 26, 2024.

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GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023
Expressed in Canadian Dollars

2. MATERIAL ACCOUNTING POLICIES

Basis of presentation

These interim unaudited condensed consolidated financial statements have been prepared on a going concern basis, under the historical cost convention, except for certain financial instruments and fixed property that have been measured at fair value. The interim unaudited condensed consolidated financial statements are presented in Canadian dollars, which is the functional currency of the Company.

These interim unaudited condensed consolidated financial statements are presented in accordance with IFRS Accounting Standards (“IFRS”), and in particular in accordance with International Accounting Standard 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). IFRS represents standards and interpretations approved by the IASB, and are comprised of IFRSs, International Accounting Standards (“IASs”), and interpretations issued by the IFRS Interpretations Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”).

Critical judgements and sources of estimation uncertainty

Critical judgements exercised in applying accounting policies that have the most significant effect on the amounts recognized in the interim unaudited condensed consolidated financial statements are as follows:

i) Determination of functional currency

The Company determines the functional currency through an analysis of several indicators such as income, expenses and cash flows, financing activities, retention of operating cash flows, and frequency of transactions with the reporting entity.

ii) Capitalization of deferred exploration costs

Management is required to assess impairment of intangible exploration and evaluation assets and property and equipment. The triggering events are defined in IFRS 6 and IAS 36 respectively. In making the assessment, management is required to make judgments on the status of each project and their future plans for finding commercial reserves to which the exploration and evaluation assets and property and equipment relate.

Management has determined that there were no triggering events present as at September 30, 2024, and 2023, as defined in IFRS 6 and IAS 36, as such, no impairment test was performed.

Critical estimates are as follows:

i) Valuation of share-based compensation

The Company uses the Black-Scholes Option Pricing Model for valuation of share-based compensation. Option pricing models require the input of subjective assumptions including expected price volatility, interest rates, and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity settled benefits.

ii) Income taxes

In assessing the probability of realizing income tax assets, management makes estimates related to expectations of future taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified.

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GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

iii) Useful life of property and equipment

Depreciation expense is allocated based on assumed useful life of property and equipment. Should the useful life differ from the initial estimate, an adjustment would be made in the statement of loss and comprehensive loss.

iv) Provisions

Provisions are inherently based on assumptions and estimates using best available information. Additional disclosure of these estimates is included in Note 7 – Decommissioning Liability.

Basis of consolidation

Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the interim unaudited condensed consolidated financial statements from the date that control commences until the date that control ceases. Accordingly, the interim unaudited condensed consolidated financial statements include the accounts of the following subsidiary companies, for which all significant intercompany transactions and balances have been eliminated.

Company Name	Place of Incorporation	Ownership %
Gratomic Graphite (Pty) Ltd	Namibia	100%
Gratomic Graphite Mining Namibia (Pty) Ltd	Namibia	100%
Ludbay Properties (Pty) Ltd	Namibia	100%
Erf Fifty Aredareigas (Pty) Ltd	Namibia	100%
Graphite Capim Grosso Holding Ltd	Bahamas	100%
Zumbi Mineracao Ltda	Brazil	99.9%

Financial instruments

(i) Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss ("FVTPL"), at fair value through other comprehensive income ("FVOCI") or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company's business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.

(ii) Measurement

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 assets and liabilities carried at FVTPL are initially recorded at fair value. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in profit or loss in the period in which they arise.

Financial assets and liabilities carried at FVOCI are initially recorded at fair value. Unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVOCI are included in comprehensive income or loss in the period in which they arise.

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GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

(iii) Impairment of Financial Assets at Amortized Cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the credit risk on the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. Regardless of whether credit risk has increased significantly, the loss allowance for trade receivables without a significant financing component classified at amortized cost, is measured using the lifetime expected credit loss approach. The Company shall recognize in the statements of net income (loss), as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

(iv) 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. Financial liabilities are derecognized when the obligation under the liability is discharged, cancelled, or expires. Gains and losses on derecognition are generally recognized in the statements of net income (loss).

(v) Measurement Hierarchy

Financial instruments that are measured at fair value are classified within a hierarchy that prioritizes their significance. The three levels of the fair value hierarchy are:

• Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;
• Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
• Level 3 - Inputs that are not based on observable market data.

Foreign exchange

The functional currency is the currency of the primary economic environment in which the entity operates. The functional currency for the Company and each of its subsidiaries is the Canadian dollar. The functional currency determinations were conducted through an analysis of the consideration factors in IAS 21, The Effects of Change in Foreign Exchange Rates.

For companies in the consolidated group whose presentation currency is the Canadian Dollar, 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, balances recorded in currencies other than the Canadian dollar are recorded at the period end rate of exchange and exchange gains and losses arising on translation are reflected in profit or loss for the year.

For companies in the consolidated group whose presentation currency is other than the Canadian Dollar translations to Canadian Dollars are done as follows: 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 statement of financial position date, while non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are reflected in profit or loss for the year.

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GRATOMIC INC.
NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023
Expressed in Canadian Dollars

Loss per share

The Company presents basic loss per share for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted loss per share does not adjust the loss attributable to common shareholders or the weighted average number of common shares outstanding when the effect is anti-dilutive.

Exploration and evaluation assets

Upon acquiring the legal right to explore a property, costs related to the acquisition, exploration and evaluation are capitalized by property. If commercially profitable ore reserves are developed, capitalized costs of the related exploration and evaluation assets are reclassified as mining assets and amortized using the unit of production method. If, after management review, it is determined that capitalized acquisition, exploration, and evaluation costs are not recoverable over the estimated economic life of the exploration and evaluation assets, or the exploration and evaluation assets are abandoned, or management deems there to be an impairment in value, the exploration and evaluation assets are written down to their net realizable value.

Any option payments received by the Company from third parties or tax credits refunded to the Company are credited to the capitalized cost of the exploration and evaluation assets. If payments received exceed the capitalized cost of the exploration and evaluation assets, the excess is recognized as income in the period received. The amounts shown for exploration and evaluation assets do not necessarily represent present or future values. Their recoverability is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain the necessary financing to complete the development, and future profitable production or proceeds from the disposition thereof.

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 to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell, and value in use. Fair value 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 an impairment loss is recognized in the 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 periods. A reversal of an impairment loss is recognized immediately in profit or loss.

Decommissioning and restoration provision

The Company recognizes liabilities for statutory, contractual, constructive, or legal obligations associated with the retirement of exploration and evaluation assets 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.

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GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

The Company’s estimate 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 provision. The Company’s estimate is reviewed annually for changes in regulatory requirements, discount rates, effects of inflation, and changes in estimates. Changes in the net present value, excluding changes in the Company’s estimate of reclamation costs, are charged to profit and loss for the year.

At September 30, 2024, the Company estimated and recorded its decommissioning liability at an amount of $608,706 (December 31, 2023 - $583,331).

Property and equipment

Property and equipment includes acquisition costs, capitalized development costs and pre-production expenditures that are recorded at cost less accumulated depreciation and accumulated impairment losses, if any. Costs of property and equipment are incurred while construction is in progress and before the commencement of commercial production. Once the construction of an asset is substantially complete, and the asset is ready for its intended use, these costs are amortized.

Depreciation is calculated using a straight-line method to write-off the cost of the assets. The depreciation rates applicable to each category of property and equipment are as follows:

Vehicles, Plant and Equipment	Straight-line over 3 years

Valuation of equity units issued in private placements

The Company has adopted the 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 most easily measured component based on fair value and then the residual value, if any, to the less easily measurable component.

The fair value of the common shares issued in a private placement was determined to be the more easily measurable component and were valued at their fair value. The balance, if any, is allocated to the attached warrants. Any value attributed to the warrants is recorded in reserves.

Share-based compensation

The Company grants stock options to acquire common shares of the Company to directors, officers, employees, and consultants. An individual is classified as an employee when the individual is an employee for legal or tax purposes or provides services similar to those performed by an employee.

The fair value of stock options, compensatory warrants, and agent options are measured on the date of grant, using the Black-Scholes option pricing model, and is recognized over the vesting period. Consideration paid for the shares on the exercise of stock options, is credited to share capital.

In situations where equity instruments, compensatory warrants, and agent options are issued to non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of goods or services received.

Share issue costs

Costs directly identifiable with the raising of capital will be charged against the related share capital. Costs related to shares not yet issued are recorded as deferred financing costs. These costs will be deferred until the issuance of the shares to which the costs relate, at which time the costs will be charged against the related share capital or charged to operations if the shares are not issued.

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11

GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

Income taxes

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 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.

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.

3. AMOUNTS RECEIVABLE

The amounts receivable balance in the amount of $1,643 (December 31, 2023 - $406,396) relates primarily to Harmonized Sales Tax and Value Added Tax due from the Canadian and Namibian governments respectively.

4. EXPLORATION AND EVALUATION ASSETS

Following is a summary of the exploration and evaluation assets:

For the nine months ended September 30, 2024	Beginning Balance ($)	Acquisition costs ($)	Exploration costs ($)	Write Off ($)	Ending Balance ($)
Aukam Namibia project	6,815,619	-	-	-	6,815,619
Zumbi Brazil project	6,414,278	-	12,000	-	6,426,278
Buckingham Quebec project	985,108	-	-	-	985,108
	14,215,005	-	12,000	-	14,227,005
For the year ended December 31, 2023	Beginning Balance ($)	Acquisition costs ($)	Exploration costs ($)	Write Off ($)	Ending Balance ($)
Aukam Namibia project	6,724,664	-	90,955	-	6,815,619
Zumbi Brazil project	6,314,728	-	99,550	-	6,414,278
Buckingham Quebec project	985,108	-	-	-	985,108
	14,024,500	-	190,505	-	14,215,005

Aukam Graphite Project, Namibia

The Aukam Graphite project is comprised of Mining License (ML) 215 (5,002 ha, in respect of base and rare metals, industrial minerals, and precious metals), owned by Gratomic Graphite Mining Namibia (Pty) Ltd ("Gratomic Graphite"); and Exclusive Prospecting Licence (EPL) 8746 (49,693 ha, in respect of base and rare metals, industrial minerals, and precious metals). Located in the district of Bethanie, Karas region of southern Namibia.

On July 29, 2021, the Company acquired the remaining 37% interest in Gratomic Graphite from Next Graphite, Inc. ("NextG"), to now hold a 100% interest. The remaining consideration payable, in the amount of US$153,248 ($207,038), and has been reflected as a note payable (December 31, 2023: $209,290).

Under Namibian law, a 2% royalty is payable on the value of minerals mined to the Namibian government in connection with the Aukam Graphite Project.

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12

GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

A 2% revenue royalty is payable to the individual who farms the property.

Zumbi Graphite Project, Brazil

On December 8, 2021, Gratomic acquired a 99.9% interest in Zumbi Mineraceo Ltda. (“Zumbi”), owner of 100% of the Capim Grosso graphite project. In consideration, Gratomic issued a total of 3,840,580 common shares in the capital of Gratomic Inc. valued at $4,954,350, and made a cash payment of $200,000. The Capim Grosso project is situated at the center east portion of the Bahia State, 280 km from the port of Salvador, the state capital, and 166 km from Feira de Santana, the state’s second largest city. The project comprises mineral claims covering a surface area of 3,728.06 hectares. The vendors retained a 3% gross smelter return royalty in respect of all minerals processed other than graphite. The Company was subsequently granted four additional Prospecting Licenses near its existing Capim Grosso Graphite project. The total area of the new claims is 6,312 ha.

On June 10, 2022, Zumbi acquired an additional 3 mineral claims comprising a total of 2,782.09 hectares located in the State of Bahia, Brazil. The properties, known as the Jacobina and Igrapiuna Prospects, are within 30 kilometers of the Zumbi project. The Company issued 1,262,865 shares valued at $505,146 and agreed to pay US$100,000 ($128,715) as consideration for the property for a total cost of $633,861. The remaining consideration payable, in the amount of US$47,087 ($63,614), is included in accounts payable and accrued liabilities (December 31, 2023: $62,277).

Buckingham, Quebec

The Company owns a 100% interest in the Buckingham properties located in the Province of Quebec.

5. PROPERTY AND EQUIPMENT

	Land and Buildings $	Plant and equipment $	Vehicles $	Total $
Cost
At December 31, 2022	1,209,435	9,844,241	511,162	11,564,838
Additions	-	1,533,359	-	1,533,359
Disposals	-	(14,836)	(42,575)	(57,411)
Reallocations	(380,579)	380,579	-	-
At December 31, 2023	828,856	11,743,343	468,587	13,040,786
Additions	-	260,504	-	260,504
Disposals	-	(1,231)	-	(1,231)
At September 30, 2024	828,856	12,002,616	468,587	13,300,059
Accumulated Depreciation
---	---	---	---	---
At December 31, 2022	105,598	23,541	216,669	345,808
Additions	-	17,081	88,648	105,729
Disposals	-	(1,237)	(32,620)	(33,856)
Reallocations	(105,598)	105,598	-	-
At December 31, 2023	-	144,982	272,698	417,680
Additions	-	7,066	12,363	19,428
Disposals	-	(1,000)	(37,508)	(38,508)
At September 30, 2024	-	151,408	247,552	398,600
Carrying Value
---	---	---	---	---
At December 31, 2023	828,856	11,598,361	195,889	12,623,105
At September 30, 2024	828,856	11,851,568	221,035	12,901,459

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13

GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

6. NOTES PAYABLE

The notes payable consist of:

a) A note payable on the NextG transaction in the amount of US$153,243 ($206,243) (December 31, 2023: $209,290). The note is denominated in US$, is unsecured, and non-interest bearing.

b) Notes payable totaling $1,405,897 from eleven individuals who are shareholders of the Company (December 31, 2023: $849,290 from eleven individuals). The loans are unsecured & due on demand.

7. DECOMMISSIONING LIABILITY

	September 30, 2024	December 31, 2023
	$	$
Environmental rehabilitation
Opening balance	583,331	577,085
Additions	-	6,246
Foreign exchange adjustment	25,375	-
Closing balance	608,706	583,331

The environmental rehabilitation provision relates to the decommissioning of plant and equipment and the restoration of the Aukam mining site upon the retirement of mining and exploration activities.

8. SHARE CAPITAL, OPTIONS, AND WARRANTS

(A) Common Shares

Authorized - an unlimited number of common shares.

The following summarizes the share transactions:

During the period ended September 30, 2024:

None.

During the year ended December 31, 2023:

a) On February 1, 2023, Gratomic completed the first tranche of a non-brokered private placement at a price of $0.30 per unit, issuing 4,348,984 units for gross proceeds of $1,304,695. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one common share at a price of $0.45 per share until the date that is two years after the closing of the Offering. A finder’s fee of $25,983 was paid to an eligible intermediary and 86,610 broker warrants were issued. Each broker warrant issued in connection with the sale of units at the initial closing entitles the holder to purchase one common share of the Company at a price of $0.45 until February 1, 2025.

b) On March 8, 2023, the Company completed the second tranche of a non-brokered private placement at a price of $0.30 per unit, issuing 4,730,951 units for gross proceeds of $1,419,285. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one common share at a price of $0.45 per share until March 8, 2025. A finder’s fee of $3,497 was paid to an eligible intermediary and 11,656 broker warrants were issued. Each broker warrant issued in connection with the sale of units at the second closing entitles the holder to purchase one common share of the Company at a price of $0.45 until March 8, 2025.

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14

GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

c) On March 29, 2023, Gratomic completed the third tranche of a non-brokered private placement at a price of $0.30 per unit, issuing 1,090,000 units for gross proceeds of $327,000. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one common share at a price of $0.45 per share until March 29, 2025.

d) On May 15, 2023, Gratomic completed the fourth tranche of its non-brokered private placement at a price of $0.30 per unit, with the placement of 1,420,000 units for proceeds of $426,000. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one common share at a price of $0.45 per share until May 15, 2025.

e) On May 19, 2023, the Company completed a further tranche of its non-brokered private placement at a price of $0.30 per unit, with the placement of 2,237,363 units for gross proceeds of $671,208.90. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one common share at a price of $0.45 per share until May 19, 2025. A finder’s fee of $1,750 was paid to an eligible intermediary and 5,833 broker warrants were issued. Each broker warrant entitles the holder to purchase one common share of the Company at a price of $0.45 until May 19, 2025.

f) On May 26 and 29, 2023, Gratomic completed the final tranche of its non-brokered private placement at a price of $0.30 per unit, with the placement of 1,515,000 units for gross proceeds of $454,500. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to purchase one common share at a price of $0.45 per share until between May 26 and May 29, 2025. A finder’s fee of $16,800 was paid to an eligible intermediary and 56,000 broker warrants were issued. Each broker warrant entitles the holder to purchase one common share of the Company at a price of $0.45 until May 29, 2025.

(B) Stock Options

The Company has adopted an incentive stock option plan in accordance with the policies of the TSX-V (the “Stock Option Plan”) which provides that the Board of Directors of the Company may from time to time, at its discretion, grant to directors, officers, employees and consultants of the Company options to purchase common shares, provided that the number of shares reserved for the issuance under the Stock Option Plan shall not exceed ten percent (10%) of the issued and outstanding common shares, at an exercise price to be determined by the Board at the time the option is granted.

No stock options were granted in 2023, and 2 500 000 stock were granted in the period ended September 30, 2024:

a) On April 30, 2024, 1,000,000 stock options were granted to Mr. Ndelineekela Helao Shivolo as a government liaison consultant, exercisable for a period of 5 years after April, 30, 2024.

b) On 24 July 2024, 750 000 + 750,000 stock options were granted to Bruno Baillavoine, Executive Chair of the Board, at an exercise price of $0.20 and $0.30 respectively, exercisable for a period of 3 years after July 1, 2025.

A summary of option transactions is as follows:	Number of options	Weighted average exercise price $
Balance December 31, 2023	10,520,000	1,149
Exercised	-	-
Granted:	1,750,000	0,20
	750,000	0,30
Balance September 30, 2024	13 020 000	0,944

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15

GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

A summary of options outstanding on September 30, 2024, is as follows:

Number outstanding and exercisable	Exercise price $	Remaining contractual life in months	Weighted average exercise price $
770 000	0,150	13	0,150
1 000 000	0,200	55	0,200
750 000	0,200	36	0,200
750 000	0,300	36	0,300
5 550 000	1,540	20	1,540
400 000	1,250	22	1,250
300 000	1,210	22	1,210
400 000	1,300	23	1,300
200 000	1,470	24	1,470
400 000	1,270	26	1,270
200 000	1,190	29	1,190
2 300 000	0,435	35	0,435
13 020 000			0,944

(C) Warrants

The Company has a total of 15,502,397 warrants outstanding. Warrant activity is analyzed as follows:

	Number of Warrants	Weighted average exercise price $
Balance December 31, 2022	6,672,322	0.67
Granted	15,342,298	0.45
Granted - broker warrants	160,099	0.45
Expired	(6,672,322)	1.45
Balance December 31, 2023 and September 30, 2024	15,502,397	0.45

A summary of warrants outstanding at September 30, 2024, is as follows:

Expiry Date	Number of Warrants	Weighted Average Exercise Price $
February 1, 2025	4,348,984	0.45
February 1, 2025	86,610	0.45
March 8, 2025	4,730,951	0.45
March 8, 2025	11,656	0.45
March 29, 2025	1,090,000	0.45
May 15, 2025	1,420,000	0.45
May 19, 2025	2,237,363	0.45
May 19, 2025	5,833	0.45
May 26, 2025	630,000	0.45
May 29, 2025	885,000	0.45
May 29, 2025	56,000	0.45
	15,502,397	0.45

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16

GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

No warrants or broker warrants were issued during the nine months ended September 30, 2024.

The 5,172,363 warrants issued during the six months ended September 30, 2023 had an estimated value of $71,175 on the date of the grant, calculated on the residual value method.

The 10,169,935 warrants issued during the six months ended March 31, 2023 had an estimated value of $364,993 on the date of the grant, calculated on the residual value method.

The 61,833 broker warrants issued during the six months ended September 30, 2023 had an estimated value of $10,687 on the date of the grant, using the Black-Scholes option pricing model with the following weighted average assumptions:

Expected dividend yield	Nil
Stock price volatility	150.0%
Risk-free interest rate	4.08% to 4.30%
Expected life of warrants	2 years

The 98,266 broker warrants issued during the three months ended March 31, 2023 had an estimated value of $16,706 on the date of the grant, using the Black-Scholes option pricing model with the following weighted average assumptions:

Expected dividend yield	Nil
Stock price volatility	150.0%
Risk-free interest rate	3.76% to 4.32%
Expected life of warrants	2 years

9. RELATED PARTY DISCLOSURES

The Company has determined that key management consists of the Company's Board of Directors and corporate officers, including the Company's Chairman, Chief Executive Officer and Chief Financial Officer. The Company paid or accrued the following amounts to key management, and private corporations owned by them:

	For the nine months ended September
	2024	2023
	$	$
Fees charged to:
Management fees and consulting fees	413,156	577,921
Professional and other expenses	266,949	112,341
	680,104	690,262

During the nine months ended September 30, 2024, legal fees in the amount of $39,734 (2023 – $54,509) were paid or payable to a law firm whose partner is an officer of the Company.

Included in accounts payable and accrued liabilities at September 30, 2024, was $868,867. (December 31, 2013 – $1,336,572) owing for services to directors, and officers, companies owned by directors and officers, and a law firm whose partner is a director and an officer of the Company.

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17

GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2024, AND 2023
Expressed in Canadian Dollars

10. SEGMENTED INFORMATION

The Company’s primary business activity is the acquisition, exploration and development of mineral properties. The location of the Company’s exploration and evaluation assets, and property and equipment, at September 30, 2024 and December 31, 2023 are as follows:

	2024	2023
	$	$
Exploration and evaluation assets
Canada	985,108	985,108
Namibia	6,815,619	6,815,619
Brazil	6,426,278	6,414,278
	14,227,005	14,215,005
Property and equipment
Namibia	12,837,911	12,594,682
Brazil	26,697	28,423
	12,864,608	12,623,105

11. CAPITAL MANAGEMENT

The Company’s objective when managing capital, defined as all components of equity, is to safeguard its ability to continue as a going concern, and to pursue the exploration, evaluation, and development of its properties. The Company manages its capital structure, and makes adjustments to it, in light of changes in economic conditions and the risk characteristics of the underlying assets and seeks to retain sufficient equity to ensure that cash flows from assets will be sufficient to meet future cash flow requirements. To maintain or adjust the capital structure, the Company may from time-to-time issue shares and adjust its capital spending. To assess capital and operating efficiency and financial strength, the Company continually monitors its net cash and working capital. The Company’s capital management objectives, policies and processes have remained unchanged since December 31, 2023.

The Company is not subject to any capital requirements imposed by a lending institution or regulatory body.

12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The fair value of cash is measured on level 1 of the fair value hierarchy. The carrying amounts for amounts receivable, and accounts payable and accrued liabilities approximate their estimated fair value due to the short-term nature of these financial instruments.

Amounts receivable is classified at amortized cost and is recorded at amortized cost, which upon their initial measurement is equal to its fair value. Subsequent measurements are recorded at amortized cost using the effective interest rate method.

Accounts payable and accrued liabilities are initially measured at their fair value. Subsequent measurements are recorded at amortized cost using the effective interest rate method.

The Company's risk exposures and the impact on its financial investments, as summarized below, have not changed significantly during the year.

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18

GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

Economic Viability and Technical Feasibility Risk

No mineral resources, let alone mineral reserves demonstrating economic viability and technical feasibility, have been delineated on the Aukam Property. The Company is not in a position to demonstrate or disclose any capital and/or operating costs that may be associated with the processing plant until the Preliminary Feasibility Study (“PFS”) is completed. The Company advises that it has not based its production decision on even the existence of mineral resources let alone on a PFS or feasibility study of mineral reserves, demonstrating economic and technical viability, and, as a result, there may be an increased uncertainty of achieving any particular level of recovery of minerals and the cost of such recovery, including increased risks associated with developing a commercially mineable deposit. Historically, such projects have a much higher risk of economic and technical failure. There is no guarantee that production will begin as anticipated or at all or that anticipated production costs will be achieved. Failure to commence production would have a material adverse impact on the Company's ability to generate revenue and cash flow to fund operations. Failure to achieve the anticipated production costs would have a material adverse impact on the Company's cash flow and future profitability.

Credit Risk

The Company’s credit risk is primarily attributable to amounts receivable. The Company has no significant concentration of credit risk arising from operations. Management believes that the credit risk concentration with respect to the financial instrument included in amounts receivable is remote.

Liquidity Risk

The Company is subject to significant liquidity risk. At September 30, 2024, the Company had current assets of $(707) (December 31, 2023 - $580,077) to settle current liabilities of $6,493,407 (December 31, 2023 - $5,003,758). The Company's financial liabilities generally have contractual maturities that are subject to normal trade terms.

Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company has cash balances and minimal interest-bearing debt. The Company's current policy is to invest excess cash in investment grade short term deposit certificates issued by its banking institutions. The Company monitors its cash balances and is satisfied with the creditworthiness of its banks. As a result of having minimal interest bearing debt, or interest earning investments, the Company's exposure to interest rate risk is minimal.

Market Risk

Foreign Currency Risk

The Company's functional and reporting currency is the Canadian dollar, and all expenditures are funded in Canadian dollars. As a result, the Company’s exposure to foreign currency risk is minimal.

Price Risk

The Company is exposed to price risk with respect to commodity prices. The Company closely monitors commodity prices to determine the appropriate course of action to be taken by the Company. As the Company's properties are in the exploration and development stages and to date do not contain any identified mineral reserves, the Company does not hedge against commodity price risk.

Sensitivity Analysis

Based on management's knowledge and experience of the financial markets, the Company believes the following movements are reasonably possible over a twelve-month period:

a) The Company receives low interest rates on its cash and cash equivalent balances and, as such, the Company does not have significant interest rate risk.

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19

GRATOMIC INC.

NOTES TO THE INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS SEPTEMBER SEPTEMBER 30, 2024, AND 2023

Expressed in Canadian Dollars

b) The Company holds balances in foreign currencies that give rise to exposure to foreign exchange risk, however at any point in time the balances are not significant. The Company estimates that a 10% increase or decrease in the foreign currency would give rise to a gain or loss of approximately $160 respectively at September 30, 2024.

13. COMMITMENTS AND CONTINGENCIES

The Company's exploration and evaluation activities are subject to government laws and regulations, including tax laws, and laws and regulations governing the protection of the environment. The Company believes that its operations comply in all material respects with all applicable past and present laws and regulations. The Company records provisions for any identified obligations, based on managements' estimate at the time. Such estimates are, however, subject to changes in laws and regulations.

The Company has a consulting agreement with its CEO providing for a monthly retainer of $26,667. The agreement:

a) Is terminable by the Company on six months' notice.
b) Contains a change of control clause providing that, in the event of a change in control, a lump sum payment equivalent to 24 months retainer fees will be paid.

The Company was a defendant in actions brought by consultants that has since been settled, and it was payable on 31 October 2024 for the total agreed of $175 000, a gain of $24 990 on amount provided plus legal cost, but the company failed to make payment on time. An effort for postponement of terms to avoid a judgement against the Company for $210,000 + legal cost and interest is underway at the time of issue of this report.

The Company has indemnified the subscribers of flow-through share offerings pursuant to subscription agreements with investors for amounts that may become payable by the shareholder as a result of the Company not having met its expenditure commitments on qualified items. During 2019, the Company's 2015 to 2018 taxation years were audited by the Canada Revenue Agency ("the CRA"). As a result of the audit the CRA has disallowed flow through expenditures in the amount of $243,000 that were renounced by the Company in favour of flow through share investors. The Company estimates that it has a maximum liability of $150,000 to the flow through share investors as a result of indemnifications provided to them, which amount has been recorded in these financial statements.

14. SUBSEQUENT EVENTS

None