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Hydrograph Clean Power Inc. — Audit Report / Information 2025
Jan 29, 2026
48058_rns_2026-01-28_32f05997-1654-4043-9075-a2512bd846ce.pdf
Audit Report / Information
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HYDROGRAPH CLEAN POWER INC.
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended September 30, 2025 and 2024
(Expressed in United States Dollars)
Independent Auditor's Report
MNP
To the Shareholders of HydroGraph Clean Power Inc.:
Opinion
We have audited the consolidated financial statements of HydroGraph Clean Power Inc. and its subsidiaries (the "Company"), which comprise the consolidated statements of financial position as at September 30, 2025 and September 30, 2024, and the consolidated statements of loss and comprehensive loss, changes in shareholders' equity and 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 September 30, 2025 and September 30, 2024, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audits 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 audits 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 indicates that the Company incurred a net loss during the year ended September 30, 2025, and, as of that date, the Company had an accumulated deficit. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate 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 of the current period. 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.
MNP LLP
2000, 112 - 4th Avenue SW, Calgary AB, T2P 0H3
1.877.500.0792 T: 403.263.3385 F: 403.269.8450
In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matter described below to be the key audit matters to be communicated in our report.
Impairment assessment for long-lived assets
Key Audit Matter Description
As described in Note 4 to the consolidated financial statements, the Company conducts an impairment test annually during the fourth quarter, or whenever certain events or changes in circumstances indicate that the carrying value may be greater than the recoverable amount. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of cash inflows of other assets or groups of assets (a cash generating unit ("CGU"). Management uses the greater of fair value less costs of disposal method and value in use to determine the recoverable amount for its one CGU.
We considered this to be a key audit matter due to the significant judgment made by management in estimating the recoverable amount for goodwill and long-lived assets and a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to management's estimates.
Audit Response
We responded to this matter by performing procedures over the impairment assessment. Our audit work in relation to this included, but was not restricted to, the following:
- We evaluated the appropriateness of management's use of the discounted cash flow model and tested the mathematical accuracy thereof.
- We involved our valuation specialists to assess the Company's impairment model, valuation methodology applied, the various inputs utilized as well as certain significant assumptions, including the discount rate.
- We performed a sensitivity analysis on certain assumptions to evaluate changes in the recoverable amount that would result from changes in the assumptions and evaluated alternative scenarios available to the Company under the terms of its licensing agreement.
Other Information
Management is responsible for the other information. The other information comprises Management's Discussion and Analysis.
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 audits 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 audits or otherwise appears to be materially misstated. We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
MNP
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 as issued by the International Accounting Standards Board, 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.
- 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 consolidated financial statements. We are responsible for the direction, supervision and review of the audit work performed for the purposes of the group audit. We remain solely responsible for our audit opinion.
MNP
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings, including any significant deficiencies in internal control that we identify during our audits.
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 Stephen Bonnell.
Calgary, Alberta
January 27, 2026
MNP LLP
Chartered Professional Accountants
MNP
HYDROGRAPH CLEAN POWER INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT SEPTEMBER 30, 2025 AND 2024
(Expressed in United States dollars)
| Note | 2025 $ | 2024 $ | |
|---|---|---|---|
| ASSETS | |||
| CURRENT ASSETS | |||
| Cash | 8,737,793 | 780,966 | |
| Prepaids | 218,069 | 37,604 | |
| Tax receivable | 47,265 | 89,060 | |
| 9,003,127 | 907,630 | ||
| NON-CURRENT ASSETS | |||
| Deposits | 6 | 284,070 | - |
| Technology and development costs | 4 | 3,178,078 | 3,178,078 |
| Right-of-use asset | 6 | 47,068 | 167,713 |
| Fixed assets | 5 | 1,028,994 | 1,150,287 |
| 4,538,210 | 4,496,078 | ||
| TOTAL ASSETS | 13,541,337 | 5,403,708 | |
| LIABILITIES | |||
| CURRENT LIABILITIES | |||
| Accounts payable and accrued liabilities | 7 | 2,932,979 | 440,130 |
| Lease liability | 6 | 62,444 | 61,870 |
| 2,995,423 | 502,000 | ||
| NON-CURRENT LIABILITIES | |||
| Other liabilities | 7 | 66,000 | 102,000 |
| Lease liability | 6 | - | 127,073 |
| 66,000 | 229,073 | ||
| TOTAL LIABILITIES | 3,061,423 | 731,073 | |
| SHAREHOLDERS' EQUITY | |||
| Share capital | 8 | 31,335,485 | 15,176,345 |
| Reserves | 8 | 2,799,594 | 4,918,958 |
| Accumulated other comprehensive loss | (326,119) | (242,914) | |
| Deficit | (23,329,046) | (15,179,754) | |
| TOTAL SHAREHOLDERS' EQUITY | 10,479,914 | 4,672,635 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 13,541,337 | 5,403,708 |
Nature and continuance of operations 1
Commitments 9
Subsequent events 14
Approved on Behalf of the Board of Directors
"Kjirstin Breure"
Kjirstin Breure, CEO, President, Director
"Tom Wilkinson"
Tom Wilkinson, Director
The accompanying notes are an integral part of these consolidated financial statements.
HYDROGRAPH CLEAN POWER INC.
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States dollars)
| Note | 2025 $ | 2024 $ | |
|---|---|---|---|
| Sales | 43,051 | 6,172 | |
| Cost of sales | (48,727) | (57,863) | |
| Gross Profit | (5,676) | (51,691) | |
| Expenses | |||
| Depreciation | 5, 6 | 293,944 | 291,047 |
| Exchange and filing fees | 35,398 | 52,079 | |
| Insurance | 88,996 | 68,174 | |
| Lease accretion | 6 | 11,641 | 17,621 |
| License maintenance fees | 299,616 | 248,878 | |
| Office and miscellaneous | 328,293 | 227,831 | |
| Professional fees | 969,871 | 662,165 | |
| Rent and occupancy | 36,445 | 82,179 | |
| Research | 362,290 | 362,513 | |
| Salaries | 7 | 2,067,206 | 2,040,411 |
| Stock-based compensation | 7, 8 | 848,154 | 396,788 |
| Travel and promotion | 690,730 | 726,035 | |
| Total Expenses | 6,032,584 | 5,175,721 | |
| Loss before other items | (6,038,260) | (5,227,412) | |
| Foreign exchange loss | (26,812) | (20,051) | |
| Write-down of equipment | 5 | (52,085) | (102,857) |
| Other income | 63,335 | 18,334 | |
| Settlement expense | 14 | (2,095,470) | - |
| Net loss | (8,149,292) | (5,331,986) | |
| Other comprehensive (loss) income | |||
| Item that will not be reclassified to profit or loss | |||
| Foreign exchange translation adjustment | (83,205) | 33,970 | |
| Comprehensive loss | (8,232,497) | (5,298,016) | |
| Net loss per share, basic and diluted | (0.03) | (0.03) | |
| Weighted average common shares outstanding | 264,544,274 | 202,919,033 |
The accompanying notes are an integral part of these consolidated financial statements.
HYDROGRAPH CLEAN POWER INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States dollars)
| Note | Shares Issued # | Share Capital $ | Reserves $ | Accumulated Other Comprehensive Loss $ | Accumulated Deficit $ | Total $ | |
|---|---|---|---|---|---|---|---|
| Balance, September 30, 2023 | 174,775,224 | 11,600,057 | 3,394,318 | (276,884) | (9,847,768) | 4,869,723 | |
| Private placement | 54,542,400 | 3,943,640 | 1,048,167 | - | - | 4,991,807 | |
| Share issue costs | - | (462,854) | 118,685 | - | - | (344,169) | |
| Shares issued for warrant exercise | 1,492,750 | 95,502 | (39,000) | - | - | 56,502 | |
| Stock-based compensation | - | - | 396,788 | - | - | 396,788 | |
| Net loss and comprehensive loss | - | - | - | 33,970 | (5,331,986) | (5,298,016) | |
| Balance, September 30, 2024 | 230,810,374 | 15,176,345 | 4,918,958 | (242,914) | (15,179,754) | 4,672,635 | |
| Private placement | 8 | 23,960,003 | 2,033,669 | 668,252 | - | - | 2,701,921 |
| Share issue costs | 8 | - | (225,216) | 62,103 | - | - | (163,113) |
| Shares issued for warrant exercise | 8 | 61,056,784 | 11,887,455 | (2,829,192) | - | - | 9,058,263 |
| Shares issued for option exercise | 8 | 9,065,933 | 2,463,232 | (868,681) | - | - | 1,594,551 |
| Stock-based compensation | 8 | - | - | 848,154 | - | - | 848,154 |
| Net loss and comprehensive loss | - | - | - | (83,205) | (8,149,292) | (8,232,497) | |
| Balance, September 30, 2025 | 324,893,094 | 31,335,485 | 2,799,594 | (326,119) | (23,329,046) | 10,479,914 |
The accompanying notes are an integral part of these consolidated financial statements.
HYDROGRAPH CLEAN POWER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States dollars)
| Notes | 2025 $ | 2024 $ | |
|---|---|---|---|
| CASH PROVIDED BY (USED IN): | |||
| OPERATING ACTIVITIES | |||
| Net loss | (8,149,292) | (5,331,986) | |
| Add back non-cash items: | |||
| Depreciation | 5, 6 | 293,944 | 291,047 |
| Lease accretion | 6 | 11,641 | 17,621 |
| Stock-based compensation | 7, 8 | 848,154 | 396,788 |
| Unrealized foreign exchange (gain) loss | (134,318) | 27,720 | |
| Write-down of equipment | 5 | 52,085 | 102,857 |
| Settlement fee | 14 | 2,095,470 | - |
| Changes in non-cash working capital balances: | |||
| Term deposit | - | 57,963 | |
| Prepaids | (180,465) | (4,113) | |
| Inventory | - | 1,293 | |
| Tax receivable | 41,795 | (67,255) | |
| Deposits | - | 506,781 | |
| Accounts payable and accrued liabilities | 397,379 | (175,713) | |
| Other liabilities | (36,000) | 102,000 | |
| Cash used in operating activities | (4,759,607) | (4,074,997) | |
| INVESTING ACTIVITIES | |||
| Acquisition of fixed assets | 5 | (164,653) | (81,426) |
| Lease deposit | 6 | (284,070) | - |
| Cash used in investing activities | (448,723) | (81,426) | |
| FINANCING ACTIVITIES | |||
| Shares issued for cash, net | 8 | 2,538,808 | 4,496,918 |
| Shares issued on warrant exercise | 8 | 9,058,263 | 56,502 |
| Shares issued on option exercise | 8 | 1,594,551 | - |
| Repayments of lease liability | 6 | (77,578) | (74,750) |
| Cash provided by financing activities | 13,114,044 | 4,478,670 | |
| Foreign currency translation differences on cash | 51,113 | 6,250 | |
| Increase in cash | 7,956,827 | 328,497 | |
| Cash, beginning | 780,966 | 452,469 | |
| Cash, ending | 8,737,793 | 780,966 |
Supplemental cash flow information – Note 12
The accompanying notes are an integral part of these consolidated financial statements.
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
1. NATURE AND CONTINUANCE OF OPERATIONS
HydroGraph Clean Power Inc. (the "Company") was incorporated under the Laws of the Province of British Columbia on June 26, 2017. The address of the Company's corporate office and its principal place of business is 1100 – 1199 West Hastings Street, Vancouver, BC, Canada.
The Company's principal business activity is the acquisition and development of graphene and hydrogen related products and services. The Company is listed on the Canadian Stock Exchange (the "CSE") under the ticker symbol HG.
The Company has never generated profit or positive cash flows from operations. For the year ended September 30, 2025, the Company reported a net loss of $8,149,292 (2024 – $5,331,986) negative cash flow from operating activities of $4,759,607 (2024 – $4,074,997), and an accumulated deficit of $23,329,046 (2024 – $15,179,754). These conditions indicate that a material uncertainty exists that may cast significant doubt about the Company's ability to continue as a going concern. The Company's ability to continue its operations as intended are dependent on its ability to obtain necessary financing and raise capital sufficient to cover its development and operating costs. Subsequent to September 30, 2025, the Company raised CAD$20,000,024 from the LIFE financing (Note 14).
These consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in these condensed interim consolidated financial statements.
2. BASIS OF PRESENTATION
a) Statement of compliance
These consolidated financial statements have been prepared in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board ("IASB") and interpretations of the IFRS Interpretations Committee.
All amounts are expressed in United States Dollars ($) except where otherwise noted as Canadian Dollars (CAD$).
These consolidated financial statements were approved and authorized for issue by the Board of Directors on January 26, 2026.
b) Measurement basis
The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments which are measured at fair value, as explained in the material accounting policies set out in Note 3. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
c) Functional and presentation currency
Determination of functional currency involves certain judgments to determine the primary economic environments in which the entities operate. Management reconsiders the functional currency of our entities if there are changes in events and conditions.
Transactions of the Company's individual entities are recorded in their own functional currency based. The functional currency and location of each entity is as follows:
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
Entity
HydroGraph Clean Power Inc.
HydroGraph USA, Inc.
HydroGraph UK Ltd.
HydroGraph Clean Power Ontario Inc. (dormant)
Location
Canada
United States
United Kingdom
Canada
Functional Currency
Canadian dollars
United States dollars
British Pounds
Canadian dollars
These consolidated financial statements are presented in United States dollars.
d) Basis of consolidation
The consolidated financial statements include the accounts of the Company and the entities controlled by the Company (its subsidiaries). The results of each subsidiary will continue to be included in the consolidated financial statements of the Company until the date that the Company's control over the subsidiary ceases. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Inter-company balances and transactions, including unrealized income and expenses arising from inter-company transactions, are eliminated on consolidation.
Details of the subsidiaries are as follows:
| Incorporated in | Percentage owned | ||
|---|---|---|---|
| 2025 | 2024 | ||
| HydroGraph Clean Power Inc. | Canada | 100% | 100% |
| HydroGraph USA, Inc. | United States | 100% | 100% |
| HydroGraph UK Ltd. | United Kingdom | 100% | 100% |
| Carbon-2D Graphene Corp. (dormant) (1) | Canada | 0% | 100% |
| HydroGraph Clean Power Ontario Inc. (dormant) | Canada | 100% | 100% |
(1) Dissolved on January 6, 2025.
- MATERIAL ACCOUNTING POLICIES
a) Financial Instruments
Financial instruments consist of financial assets and financial liabilities and are initially recognized at fair value along with, in the case of a financial asset or liability not at fair value through profit or loss ("FVTPL"), transaction costs that are directly attributable to the acquisition or issue of the financial asset or liability. Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or loss.
The Company classifies its financial assets and financial liabilities in the following measurement categories:
(i) those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss); and
(ii) those to be measured at amortized cost.
The classification of financial assets depends on the business model for managing the financial assets and the contractual terms of the cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost at the end of subsequent accounting periods. All other financial assets are measured at their fair values at the end of subsequent accounting periods, with any changes taken through profit or loss or other comprehensive income.
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HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
Financial liabilities are classified as those to be measured at amortized cost unless they are designated as those to be measured subsequently at FVTPL. Any fair value changes attributable to changes in credit risk for liabilities designated at FVTPL are recorded in other comprehensive income and any fair value change in excess of the amount attributable to changes in credit risk is recognized in profit or loss.
The Company's financial instruments consist of cash, accounts receivable, term deposit, accounts payable and accrued liabilities and shares issuable. Except for cash, all financial instruments held by the Company are measured at amortized cost. The fair values of the financial instruments measured at amortized cost approximate their carrying values due to their short-term maturities. The fair value of cash is measured at FVTPL and any changes to fair value after initial recognition are recorded in profit or loss for the period in which they occur.
The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.
IFRS 9 introduced a new three-stage expected credit loss model for calculating impairment for financial assets. IFRS 9 no longer requires a triggering event to have occurred before credit losses are recognized. An entity is required to recognize expected credit losses when financial instruments are initially recognized and to update the amount of expected credit losses recognized at each reporting date to reflect changes in the credit risk of the financial instruments. In addition, IFRS 9 requires additional disclosure requirements about expected credit losses and credit risk.
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods, if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized.
b) Use of estimates
The preparation of these consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses for the periods reported. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.
The more significant areas where management estimate has been applied are:
(i) Fair value of warrants and stock options
The fair value of warrants and regular stock options is measured using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted. The fair value of stock options with market performance conditions are determined using the Black-Scholes option pricing model incorporating the Monte Carlo simulation. Inputs to the models are subject to various estimates regarding volatility, interest rates, dividend yields, forfeiture rates and expected life of the units issued.
(ii) Leases
The application of IFRS 16 requires the Company to make judgments and estimates that affect the measurement of right-of-use assets and lease liabilities. In determining the lease term, all facts and circumstances that create an economic incentive to exercise renewal options (or not
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HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
exercise termination options) are considered. The Company has estimated an incremental borrowing rate of 8% to determine the fair value of the right-to-use assets and the associated lease liability.
(iii) Impairment of fixed assets and technology and development costs
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less cost of disposal and value in use. The value in use calculation is based on a discounted cash flow model. The estimated future cash flows are derived from management estimates and budgets. The recoverable amount is sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash flows and growth rate used for extrapolation purposes.
c) Use of judgments
Critical accounting judgments are accounting policies that have been identified as being complex or involving subjective judgments or assessments with a significant risk of material adjustment in the next year. The more significant areas where management judgement has been applied are:
(i) Going concern
The assessment of the Company's ability to execute its strategy by funding future working capital requirements involves judgment. The directors monitor future cash requirements to assess the Company's ability to meet these future funding requirements. Further information regarding going concern is outlined in Note 1.
The application of the Company's accounting policy for technology and product development costs requires judgment in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Technology and product development costs are not yet available for use. Estimates and assumptions made may change if new information becomes available. If information becomes available after expenditures are capitalized suggesting that the recovery of the expenditures are unlikely, the amount capitalized is written off in profit or loss in the period the new information becomes available.
(ii) Determination of the functional currency
The Company determines the functional currencies of the entities through an analysis of several indicators such as expenses and cash flows, financing activities, retention of operating cash flows, and frequency of transactions within the reporting entity.
d) Technology and development costs
All expenditures related to technology and product development including acquisition costs for technology interests and are classified as intangible assets.
The recoverability of technology and product development costs is dependent on the existence of economically viable markets and the profitability of future operations. Amounts capitalized to technology and development costs do not necessarily reflect present or future values.
At the end of each reporting period, the Company reviews the carrying amounts of the technology and development costs to determine whether those assets have suffered an impairment loss. The recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any).
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. An impairment loss is recognized immediately in the consolidated statement of loss and comprehensive loss.
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HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased up to the revised estimate of its recoverable amount. The increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized immediately in the consolidated statement of loss and comprehensive loss.
The Company's technology and development assets are not yet ready for intended use and therefore no amortization has been recorded.
Recorded costs of technology and development costs are not intended to reflect present or future values. The recorded costs are subject to measurement uncertainty and it is reasonably possible, based on existing knowledge, that change in future conditions could require a material change in the recognized amount.
e) Fixed assets
Fixed assets are recorded at historical cost less accumulated depreciation. Historical cost includes amounts that are directly attributable to the acquisition, construction, development or betterment of the asset, as well as interest related to financing during construction.
At the end of each reporting period, the Company assesses whether there are indications that an asset may be impaired. If any indication of impairment exists, the Company estimates the recoverable amount of the asset. If the carrying amount of the asset, or its respective cash generating unit, exceeds the recoverable amount, the difference is recognized as an impairment charge.
Leasehold improvements are amortized over the expected term of the lease, including the two renewal options.
Manufacturing equipment and furniture is depreciated on a straight-line basis over 6 years.
Computer equipment is depreciated on a straight-line basis over 3 years.
f) Leases
Leases are accounted for using IFRS 16. At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone process. However, for the leases of land and buildings in which it is the lessee, the Company has elected not to separate non-lease components and account for the non-lease components as a single component.
The Company recognizes the right-of-use asset and a lease liability at the commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term over the term of the lease. In addition, right-of-use assets are reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or if that rate cannot be readily determined, the Company's incremental borrowing rate as the discount rate.
9 | Page
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
g) Provisions
Provisions are recorded when a present legal or constructive obligation exists as a result of past events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
h) Share-based payments
The stock option plan allows the Company to issue stock options or restricted share units to the Company's officers, directors, employees, management companies and consultants to acquire shares of the Company. The fair value of options granted are recognized as an expense with a corresponding increase in equity.
The fair value of stock options granted are measured at grant date and each tranche is recognized on a graded basis over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option pricing model and the Monte Carlo simulation for stock options with market performance conditions taking into account the terms and conditions upon which the options were granted. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of stock options that are expected to vest.
Stock options granted to non-employees are measured at the fair value of the goods or services received, unless that fair value cannot be estimated reliably, in which case the fair value of the equity instruments issued is used. The value of the goods or services is recorded at the earlier of the vesting date, or the date the goods or services are received.
Restricted share units are recorded at fair value based on the Company's stock trading price on the date of grant and recognized in profit or loss over the vesting period.
All share-based payments are reflected in reserves, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in reserves is credited to share capital, adjusted for any consideration paid.
i) Share capital
The fair value of the common shares issued in the private placements was determined to be the residual between the proceeds and the fair value of the warrants. The fair value of the warrants is determined using the Black-Scholes option pricing model. Warrants that are issued as payment for an agency fee or other transaction cost are accounted for as share-based payments.
Share issue costs are charged to share capital when the related shares are issued.
j) Basic and diluted loss per share
Basic earnings or loss per share represents the income or loss for the period, divided by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per share represents the income or loss for the period, divided by the weighted average number of common shares outstanding during the period plus the weighted average number of dilutive shares resulting from the exercise of stock options, warrants and other similar instruments where the inclusion of these would not be anti-dilutive.
k) Foreign exchange
Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary assets and
10 | Page
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All gains and losses on translation of these foreign currency transactions are charged to profit or loss.
The statement of financial position of each subsidiary is translated into United States dollars using the exchange rate at the statement of financial position date and the income statement is translated into United States dollars using the average exchange rate for the period. All gains and losses on translation of a subsidiary from the functional currency to the presentation currency are charged to other comprehensive (loss) income until the subsidiary is disposed of, at which time, the cumulative amount is reclassified to profit or loss.
I) Income tax
Income tax expense comprises current and deferred income tax. Tax is recognized in the income statement except to the extent that it relates to items recognized directly into equity, in which case the related tax effect is recognized in equity.
Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible. Current tax expense is calculated using tax rates, laws and government policies that were enacted or substantively enacted at the Statements of Financial Position date.
Deferred tax is accounted for using a temporary difference approach and is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and the corresponding tax bases used in the computation of taxable income. Deferred tax is calculated based on the expected manner in which temporary differences related to the carrying amounts of assets and liabilities are expected to reverse using tax rates and laws enacted or substantively enacted which are expected to apply in the period of reversal. Deferred tax assets and liabilities are not recognized in respect of temporary differences that arise on initial recognition of assets and liabilities acquired other than in a business combination and which do not affect accounting or taxable profit or loss at the time of the transaction.
m) Adoption Of New Accounting Standards
There were no new standards effective for the year ended September 30, 2025 that impacted the Company's condensed interim consolidated financial statements.
n) Accounting Standards Issued But Not Yet Effective
In April 2024, the IASB released IFRS 18 Presentation and Disclosure in Financial Statements. IFRS 18 replaces IAS 1 Presentation of Financial Statements while carrying forward many of the requirements in IAS 1. IFRS 18 introduces three sets of new requirements to give investors more transparent and comparable information about companies' financial performance for better investment decisions: i) Three defined categories for income and expenses (operating, investing and financing) to improve the structure of the income statement, and require all companies to provide new defined subtotals, including operating profit; ii) Requirement for companies to disclose explanations of management-defined performance measures (MPMs) that are related to the income statement; iii) Enhanced guidance on how to organize information and whether to provide it in the primary financial statements or in the notes. IFRS 18 requires retrospective application with specific transition provisions. The Company is required to apply IFRS 18 for annual reporting periods beginning on or after January 1, 2027 with early adoption permitted. The Company is currently evaluating the impact of IFRS 18 on its consolidated financial statements.
11 | Page
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
4. TECHNOLOGY AND DEVELOPMENT COSTS
The Company has executed a multiple license agreement with Kansas State University Research Foundation ("KSURF") which grants the Company access to the technology developed including hydrogen and graphene detonation technology and certain applications of graphene technology (the "License Agreement"). The License Agreement carries several future commitments as disclosed in Note 9.
There were no changes in the technology and development costs during the year ended September 30, 2025 and 2024. The balance of technology and development costs at September 30, 2025 and 2024 was $3,178,078.
Technology and development costs will not commence being amortized until the assets are ready for their intended use. Accordingly, the Company performs an impairment test on an annual basis, or whenever there are indicators of impairment. The inputs to the impairment test are projected revenues and costs and discounted using a credit adjusted rate. As of September 30, 2025 and 2024, no impairment was recognized.
12 | Page
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
- FIXED ASSETS
| Manufacturing Equipment $ | Leasehold Improvements $ | Furniture $ | Computer $ | Equipment in Process $ | Total $ | |
|---|---|---|---|---|---|---|
| Cost | ||||||
| Balance, September 30, 2023 | 424,564 | 769,001 | 30,098 | 18,867 | 514,174 | 1,756,704 |
| Additions | 26,302 | - | 4,017 | 1,664 | 49,443 | 81,426 |
| Write-down | (146,453) | - | (10,010) | (1,664) | - | (158,127) |
| Balance, September 30, 2024 | 304,413 | 769,001 | 24,105 | 18,867 | 563,617 | 1,680,003 |
| Additions | 9,900 | 25,250 | 7,050 | - | 122,453 | 164,653 |
| Transfer | 526,045 | 92,377 | - | - | (618,422) | - |
| Write-down | - | - | - | - | (52,085) | (52,085) |
| Balance, September 30, 2025 | 840,358 | 886,628 | 31,155 | 18,867 | 15,563 | 1,792,571 |
| Accumulated amortization | ||||||
| Balance, September 30, 2023 | 115,039 | 226,218 | 8,292 | 3,582 | - | 353,131 |
| Additions | 78,905 | 143,682 | 3,953 | 5,315 | - | 231,855 |
| Write-down | (55,270) | - | - | - | - | (55,270) |
| Balance, September 30, 2024 | 138,674 | 369,900 | 12,245 | 8,897 | - | 529,716 |
| Additions | 77,354 | 143,682 | 7,512 | 5,313 | - | 233,861 |
| Balance, September 30, 2025 | 216,028 | 513,582 | 19,757 | 14,210 | - | 763,577 |
| Net book value | ||||||
| Balance, September 30, 2024 | 165,739 | 399,101 | 11,860 | 9,970 | 563,617 | 1,150,287 |
| Balance, September 30, 2025 | 624,330 | 373,046 | 11,398 | 4,657 | 15,563 | 1,028,994 |
During the year ended September 30, 2025, the Company decided to discontinue the use of certain manufacturing equipment, furniture and computers and wrote down those fixed assets with a net book value of $52,085 to $nil (2024 - $102,857 to $nil). Accordingly, the Company recorded a write-down of equipment to the statement of loss and comprehensive loss in the amount of $52,085 (2024 - $102,857).
13 | Page
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
6. LEASE LIABILITY AND RIGHT OF USE ASSET
The Company entered into a facility lease in Kansas on June 9, 2021 and recognized a lease obligation with respect to the lease expiring on June 30, 2023. The lease obligation included two extension options: one until June 30, 2025 and one until June 30, 2027, which were included in the calculation. On May 22, 2025, the Company extended the lease in Kansas to June 30, 2026 with an extension option to June 30, 2028. Monthly payments of $9,350 include a fixed portion of $7,172 and a variable portion initially estimated at $2,178. The present value of the lease obligation was calculated using the rate of 8.0% per annum and the end date of June 30, 2026.
On August 8, 2025, the Company entered into a lease for a new 20,000-square-foot headquarters facility in Austin, Texas, which will replace its current space in Manhattan, Kansas. The lease will commence on the earlier of the date the Company commences business operations from the location or January 1, 2026. The term of the lease is 5 years and 2 months, with the Company having an option to renew the lease for 5 years at the then market rate. A security deposit of $284,070 was paid to the lessor and $102,775 of leasehold improvements was provided to the Company. The total of annual lease payments in the first year, including estimated operating expenses, is $493,000. The total of estimated lease payments over the term of the lease is $2,750,000. As the lease did not commence as at September 30, 2025, no right-of-use asset and lease liability was recorded.
(a) Right of use asset
| September 30, 2025 | September 30, 2024 | |
|---|---|---|
| $ | $ | |
| Balance, beginning | 167,713 | 226,905 |
| Depreciation charge | (60,083) | (59,192) |
| Lease remeasurement | (60,562) | - |
| Balance, ending | 47,068 | 167,713 |
(b) Lease liability
| September 30, 2025 | September 30, 2024 | |
|---|---|---|
| $ | $ | |
| Balance, beginning | 188,943 | 246,072 |
| Lease payments | (77,578) | (74,750) |
| Lease accretion | 11,641 | 17,621 |
| Lease remeasurement | (60,562) | - |
| Balance, ending | 62,444 | 188,943 |
| Current portion | (62,444) | (61,870) |
| Balance, ending, non-current portion | - | 127,073 |
14 | Page
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
The following is a schedule of the Company's future minimum lease payments related to the office lease obligation:
| September 30, 2025 | |
|---|---|
| $ | |
| 2026 | 64,544 |
| Total minimum lease payments | 64,544 |
| Less: imputed interest | (2,100) |
| Total present value of minimum lease payments | 62,444 |
| Less: current portion | (62,444) |
| Non-current portion | - |
7. RELATED PARTY TRANSACTIONS AND BALANCES
Key management are those personnel having the authority and responsibility for planning, directing and controlling the Company and include the current and former board of directors, the Chief Executive Officer, the current and former Chief Financial Officer and the former Chief Accounting Officer. Key management compensation included the following:
| September 30, 2025 | September 30, 2024 | |
|---|---|---|
| $ | $ | |
| Short-term benefits - management and director compensation | 459,192 | 612,594 |
| Termination benefits | - | 334,000 |
| Share-based payments | 538,688 | 214,530 |
| Total | 997,880 | 1,161,124 |
During the year ended September 30, 2025, the Company incurred $153,647 (2024 - $5,512) for CFO, accounting, corporate secretarial and administrative services from Malaspina Consultants Inc. a company in which the CFO is a Managing Director and shareholder.
As at September 30, 2025, $65,418 (2024 - $76,208) was due to current and former related parties of the Company and has been included in accounts payable and accrued liabilities on the consolidated statement of financial position. As at September 30, 2025, $66,000 (2024 - $102,000) was due to former related parties of the Company and has been included in other liabilities.
As at September 30, 2025, $15,000 (2024 - $nil) is included in prepaid expenses in connection with Board fees advanced to directors.
8. SHARE CAPITAL
(a) Authorized Share Capital
The Company is authorized to issue an unlimited number of common shares without par value.
Year ended September 30, 2025
(i) On December 12, 2024, the Company completed a private placement of 23,960,003 units at a price of $0.113 (CAD$0.16) per unit for gross proceeds of $2,701,921 (CAD$3,833,600).
15 | Page
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
Each unit consists of one common share and one-half of one common share purchase warrant. Each whole warrant entitles the holder thereof to purchase one common share at a price of CAD$0.24 up to December 12, 2027. The warrants were valued at $668,252 using the Black-Scholes Option Pricing model with the following weighted-average assumptions: expected life – 3 years; volatility – 82.84%, risk-free rate – 2.94%, dividend yield – 0%. The Company allocated $2,033,669 and $668,252 to share capital and reserves, respectively.
In connection with the private placement, the Company issued 1,113,350 finders' warrants, incurred $125,550 in cash finders' fees and $37,563 in other issuance costs. Each finders' warrant is exercisable into a finders' unit, consisting of one common share and one-half of one common share purchase warrant (the "Finder Unit Warrant"), at a price of CAD$0.16 up to December 12, 2027. Each Finder Unit Warrant is exercisable into one common share at a price of CAD$0.24 per common share up to December 12, 2027. The finders' warrants were valued at $62,103 using the Black-Scholes Option Pricing model with the following weighted-average assumptions: expected life – 3 years; volatility – 82.84%, risk-free rate – 2.94%, dividend yield – 0%.
(ii) During the year ended September 30, 2025, the Company issued 9,065,933 common shares on option exercise at the weighted average exercise price of $0.18 (CAD$0.24) for gross proceeds of $1,594,551. The Company transferred the fair value of $868,681 from reserves to share capital in connection with the exercises.
(iii) During the year ended September 30, 2025, the Company issued 61,056,784 common shares on warrant exercise at the weighted average exercise price of $0.15 (CAD$0.20) for gross proceeds of $9,058,263. The Company transferred the fair value of $2,829,192 from reserves to share capital in connection with the exercises.
Year ended September 30, 2024
(i) On June 11, 2024, the Company completed a non-brokered private placement of 22,830,544 units at a price of $0.116 (CAD$0.16) per unit for gross proceeds of $2,653,365 (CAD$3,652,887).
Each unit consists of one common share and one-half of one share purchase warrant. Each whole warrant entitles the holder thereof to purchase one common share at a price of CAD$0.27 up to June 11, 2027. The warrants were valued at $726,047 using the Black-Scholes Option Pricing model with the following weighted-average assumptions: expected life – 3 years; volatility – 84.4%, risk-free rate – 3.84%, dividend yield – 0%. The Company allocated $1,927,318 and $726,047 to share capital and reserves, respectively.
In connection with the private placement, the Company issued 950,679 finders' with a fair value of $75,942, incurred $106,862 in cash finders' fees and $57,467 of other share issuance costs. Each finders' warrant is exercisable into a finders' unit, consisting of one common share and one-half of one common share purchase warrant (the "Finders' Unit Warrant"), at a price of CAD$0.16 up to June 11, 2027. Each Finders' Unit Warrant is exercisable into one common share at a price of CAD$0.27 up to June 11, 2027. The value of finders' warrants was calculated using the Black-Scholes Option Pricing model with the following weighted-average assumptions: expected life – 3 years; volatility – 84.4%, risk-free rate – 3.84%, dividend yield – 0%.
(ii) On April 5, 2024, the Company completed a non-brokered private placement of 11,825,000 units at a price of $0.074 (CAD$0.10) per unit for gross proceeds of $869,613 (CAD$1,182,500).
Each unit consists of one common and one-half of one share purchase warrant. Each whole warrant entitles the holder thereof to purchase one common share at a price of CAD$0.18 up to April 5, 2026, subject to an acceleration right (the "Warrant Acceleration Right") exercisable
16 | Page
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
by the Company, if on any ten consecutive trading days the daily volume weighted average trading price of the common shares on the Canadian Securities Exchange is CAD$0.28 or greater per common share. If the Company exercises its Warrant Acceleration Right, the new expiry date of the warrants will be the 30th day following the notice of such exercise. The warrants were valued at $105,119 using the Black-Scholes Option Pricing model with the following weighted-average assumptions: expected life – 2 years; volatility – 81.02%, risk-free rate – 4.21%, dividend yield – 0%. The Company allocated $764,494 and $105,119 to share capital and reserves, respectively.
In connection with the private placement, the Company issued 827,750 finders' warrants with a fair value of $23,395, incurred $60,873 in cash finders' fees and $25,815 of other share issuance costs. Each finders' warrant is exercisable into a finders' unit, consisting of one common share and one-half of one common share purchase warrant (the "Finders' Unit Warrant"), at a price of CAD$0.10 up to April 5, 2026. Each Finders' Unit Warrant is exercisable into one common share at a price of CAD$0.18 up to April 5, 2026. The value of finders' warrants was calculated using the Black-Scholes Option Pricing model with the following weighted-average assumptions: expected life – 2 years; volatility – 81.02%, risk-free rate – 4.21%, dividend yield – 0%.
(iii) On February 23, 2024, the Company completed a non-brokered private placement of 9,626,000 units at a price of $0.074 (CAD$0.10) per unit for gross proceeds of $713,354 (CAD$962,600).
Each unit consists of one common share and one-half of one share purchase warrant. Each whole warrant entitles the holder thereof to purchase one common share at a price of CAD$0.18 up to February 23, 2026, subject to an acceleration right (the "Warrant Acceleration Right") exercisable by the Company, if on any ten consecutive trading days the daily volume weighted average trading price of the common shares on the Canadian Securities Exchange is CAD$0.28 or greater per common share. If the Company exercises its Warrant Acceleration Right, the new expiry date of the warrants will be the 30th day following the notice of such exercise. The warrants were valued at $99,279 using the Black-Scholes Option Pricing model with the following weighted-average assumptions: expected life – 2 years; volatility – 82.19%, risk-free rate – 5.0%, dividend yield – 0%. Accordingly, the Company allocated $614,075 and $99,279 to share capital and reserves, respectively.
In connection with the private placement, the Company issued 607,320 finders' warrants with a fair value of $19,348, incurred $45,007 in cash finders' fees and $26,028 of other share issuance costs. Each finders' warrant is exercisable into a finders' unit, consisting of one common share and one-half of one common share purchase warrant (the "Finder Unit Warrant"), at a price of CAD$0.10 up to February 26, 2024. Each Finders' Unit Warrant is exercisable into one common share at a price of CAD$0.18 up to February 23, 2026. The value of finders' warrants was calculated using the Black-Scholes Option Pricing model with the following weighted-average assumptions: expected life – 2 years; volatility – 82.19%, risk-free rate – 5.0%, dividend yield – 0%.
(iv) On December 1, 2023, the Company completed a non-brokered private placement of 10,260,856 units at a price of $0.074 (CAD$0.10) per unit for gross proceeds of $755,475 (CAD$1,026,086).
Each unit consists of one common share and one-half of one share purchase warrant. Each whole warrant entitles the holder thereof to purchase one common share at a price of CAD$0.18 up to December 1, 2025, subject to an acceleration right (the "Warrant Acceleration Right") exercisable by the Company, if on any ten consecutive trading days the daily volume weighted average trading price of the common shares on the Canadian Securities Exchange is CAD$0.18 or greater per common share. If the Company exercises its Warrant Acceleration Right, the new expiry date of the warrants will be the 30th day following the notice of such exercise. The warrants were valued at $117,722 using the Black-Scholes Option Pricing
17 | Page
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
model with the following weighted-average assumptions: expected life – 2 years; volatility – 89.29%, risk-free rate – 4.07%, dividend yield – 0%. The Company allocated $637,753 and $117,722 to share capital and reserves, respectively. In connection with the financing, the Company incurred other share issuance costs of $22,117.
(v) During the year ended September 30, 2024, the Company issued 1,492,750 common shares on warrant exercise at the weighted average exercise price of $0.04 (CAD$0.05) for gross proceeds of $56,502. The Company transferred the fair value of $39,000 from reserves to share capital in connection with the exercises.
(b) Stock Options
The Company had a stock option plan. The stock option plan was amended effective August 1, 2025 to be a share compensation plan (the "Plan"), which includes Restricted Share Units, under which it can grant options or Restricted Share Units to directors, officers, employees and consultants. The Plan is a "rolling up to 15%" omnibus plan whereby the total number of common shares that are issuable pursuant to all stock options and restricted share units, in aggregate, is equal to up to a maximum of 15% of the issued and outstanding common shares of the Company. The maximum number of common shares reserved for issue to any one person under the Plan in any 12 month period cannot exceed 5% of the issued and outstanding number of common shares at the date of the grant and the maximum number of common shares reserved for issue to a consultant or a person engaged in investor relations activities in any 12 month period cannot exceed 2% of the issued and outstanding number of common shares at the date of the grant.
Under the Plan, the exercise price of options granted is determined by the Board of Directors, provided that the exercise price is not less than the price permitted by an exchange or a quotation system on which the Company's shares may be listed or quoted for trading. The term of any options granted under the Plan is fixed by the Board of Directors and may not exceed ten years from the date of grant. Vesting, if any, and other terms and conditions relating to such options shall be determined by the Board of Directors of the Company. Any options granted pursuant to the Plan will terminate generally within 120 days of the option holder ceasing to act as a director, officer, employees, or consultant. All stock options which have been issued are equity settled.
During the year ended September 30, 2025, the Company granted a total of 9,630,030 stock options to directors, employees and officers of the Company. 900,000 options vest as follows: ¼ on grant date, ¼ on each 9, 18 and 27 months anniversary following the grant date, 5,293,000 stock options vest as follows: 1/3 on each anniversary of the grant date and 3,437,030 options vest upon the Company achieving cumulative revenue of US$50,000,000 for the period from January 1, 2025 to December 31, 2027.
The fair value of each stock option granted during the years ended September 30, 2025 and 2024 was estimated on the date of grant with the following weighted average assumptions:
| 2025 | 2024 | |
|---|---|---|
| Risk-free interest rate (%) | 2.85 | 3.38 |
| Expected life (years) | 5 | 5 |
| Expected volatility (%) | 91 | 84 |
| Forfeiture rate (%) | - | - |
| Expected dividends | - | - |
The weighted average fair value of stock options at the grant date for year ended September 30, 2025 was CAD$0.67 per option (2024 – CAD$0.09). The total share-based compensation expense recognized during the year ended September 30, 2025 for stock options was $791,194 (2024 - $396,788).
18 | Page
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
The changes in options during year ended September 30, 2025 and 2024 are as follows:
| Options # | Weighted average exercise price ($ CAD) | |
|---|---|---|
| Balance, September 30, 2023 | 16,340,000 | 0.25 |
| Granted | 7,600,000 | 0.19 |
| Forfeited | (2,829,767) | 0.25 |
| Balance, September 30, 2024 | 21,110,233 | 0.23 |
| Granted | 9,630,030 | 0.91 |
| Exercised | (9,065,933) | 0.24 |
| Forfeited | (675,000) | 0.22 |
| Balance, September 30, 2025 | 20,999,330 | 0.54 |
The weighted average share price on the date of option exercise during the year ended September 30, 2025 was CAD$1.25.
Details of the options outstanding and exercisable as at September 30, 2025 are as follows:
| Outstanding # | Exercisable # | Exercise Price ($ CAD) | Expiry Date | Weighted average remaining life (in years) |
|---|---|---|---|---|
| 1,000,000 | 1,000,000 | 0.25 | 14-Jun-26 | 0.70 |
| (1)6,112,500 | 2,800,000 | 0.19 | 21-Jun-29 | 3.73 |
| 500,000 | 250,000 | 0.19 | 18-Dec-29 | 4.22 |
| 200,000 | 50,000 | 0.31 | 27-Feb-30 | 4.41 |
| 100,000 | 25,000 | 0.33 | 07-Mar-30 | 4.44 |
| 3,437,030 | - | 0.26 | 16-Apr-30 | 4.55 |
| 100,000 | 25,000 | 0.24 | 28-Apr-30 | 4.58 |
| 4,143,000 | - | 1.25 | 01-Aug-30 | 4.84 |
| 1,000,000 | - | 2.16 | 12-Aug-30 | 4.87 |
| 150,000 | - | 2.43 | 18-Aug-30 | 4.88 |
| 1,500,000 | 1,500,000 | 0.25 | 28-Feb-32 | 6.42 |
| 1,300,000 | 975,000 | 0.25 | 20-Apr-32 | 6.56 |
| 631,800 | 631,800 | 0.25 | 21-Nov-32 | 7.15 |
| 700,000 | 490,000 | 0.25 | 12-Jan-33 | 7.29 |
| (2)125,000 | 62,500 | 0.25 | 06-Apr-33 | 7.52 |
| 20,999,330 | 7,809,300 | 4.64 |
(1) Subsequent to September 30, 2025, 800,000 of these options were exercised for gross proceeds of CAD$152,000.
(2) Subsequent to September 30, 2025, these options were exercised for gross proceeds of CAD$31,250.
(c) Restricted Share Units ("RSUs")
The Plan authorizes the grant of RSUs. The Plan is a "rolling up to 15%" omnibus plan whereby the total number of common shares that are issuable pursuant to all stock options and restricted share units, in aggregate, is equal to up to a maximum of 15% of the issued and outstanding common shares of the Company. For greater certainty, any RSUs that must be settled in cash shall not count towards the maximum of 15%. Vesting, if any, and other terms and conditions relating to such RSUs shall be determined by the Board of Directors of the Company, provided that no RSUs vest before the date that is one year following the date of the grant. Vested RSUs can be settled in cash, shares
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
or a combination of cash and shares, at the Company's discretion. Any RSUs granted pursuant to the Plan will terminate generally within 60 days of the holder ceasing to act as a director, officer, employees, or consultant.
During the year ended September 30, 2025, the Company granted 625,000 RSUs to directors, officers and a consultant of the Company. 63,333 of the RSUs were forfeited prior to September 30, 2025. The RSUs vest as follows: 1/3 on each anniversary of the date of the grant.
| Grant date | RSUs # |
|---|---|
| August 1, 2025 | 446,667 |
| August 13, 2025 | 40,000 |
| August 18, 2025 | 75,000 |
| Balance, September 30, 2025 | 561,667 |
A summary of RSUs outstanding as at September 30, 2025 and 2024 and the changes for the years then ended is presented below:
| RSUs # | |
|---|---|
| Balance, September 30, 2024 and 2023 | - |
| Granted | 625,000 |
| Forfeited | (63,333) |
| Balance outstanding, September 30, 2025 | 561,667 |
| Balance outstanding and exercisable, September 30, 2025 | - |
The total share-based compensation expense recognized during the year ended September 30, 2025 for RSUs was $56,960 (2024 - $nil).
(d) Warrants
The changes in warrants during the year September 30, 2025 and 2024 are as follows:
| Warrants # | Weighted average exercise price ($ CAD) | |
|---|---|---|
| Balance, September 30, 2023 | 58,094,582 | 0.51 |
| Issued | 29,656,949 | 0.21 |
| Exercised | (1,492,750) | 0.05 |
| Expired | (27,962,033) | 0.71 |
| Balance, September 30, 2024 | 58,296,748 | 0.20 |
| Issued | 15,352,527 | 0.23 |
| Exercised | (61,056,787) | 0.21 |
| Expired | (861,832) | 0.20 |
| Balance, September 30, 2025 | 11,730,656 | 0.23 |
The weighted average share price on the date of warrant exercise during the year ended September 30, 2025 was CAD$1.24 (2024 - CAD$0.08).
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HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
Details of the warrants outstanding as at September 30, 2025 are as follows:
| Outstanding # | Exercise Price ($ CAD) | Expiry Date | Weighted average remaining life (in years) |
|---|---|---|---|
| 2,837,184 | 0.18 | 1-Dec-25 | 0.17 |
| 125,000 | 0.18 | 23-Feb-26 | 0.40 |
| 600,000 | 0.18 | 5-Apr-26 | 0.51 |
| 3,645,209 | 0.27 | 11-Jun-27 | 1.70 |
| 4,521,251 | 0.24 | 12-Dec-27 | 2.20 |
| 1,137 | 0.24 | 12-Dec-27 | 2.20 |
| (1) 875 | 0.16 | 12-Dec-27 | 2.20 |
| (2) 11,730,656 | 1.45 |
(1) Exercisable into a finders' unit, consisting of one common share and one-half of one common share purchase warrant, at a price of $0.16 CAD up to December 12, 2027. Each whole warrant within the unit is exercisable into one common share at a price of $0.24 CAD per common share up to December 12, 2027.
(2) Subsequent to September 30, 2025, an aggregate of 6,710,810 warrants were exercised for gross proceeds of CAD$1,439,103.
(e) Shares held in escrow
As at September 30, 2025, the Company has nil common shares held in escrow (2024 –1,717,500). These escrow shares were subject to escrow trading restrictions pursuant to the Escrow agreement and were released as follows: 17,425,678 six months after the Company's securities were listed on a Canadian exchange ("Listing"), 15,708,178 nine months after Listing, 17,425,678 twelve months after Listing, 19,635,223 fifteen months after Listing, 1,717,500 eighteen months after Listing, 1,717,500 twenty four months after Listing, 1,717,500 thirty months after Listing and 1,717,500 thirty six months after Listing. During the year ended September 30, 2025, the final 1,717,500 common shares were released.
- COMMITMENTS
The commitments of the Company related to the License Agreements with KSURF are as follows:
The July 2017 licensing agreement as amended in July 2022. The Company has seven (7) licenses.
(i) The Company will pay annual maintenance fees of:
i. $10,000 per calendar year 2020 to 2022 per license, for a total of $70,000 (paid)
ii. $10,000 per calendar year 2023 per license, for a total of $70,000 (paid)
iii. $10,000 per calendar year 2024 per license, for a total of $70,000 (paid)
iv. $25,000 per calendar year 2025 per license, for a total of $175,000 (paid)
v. $35,000 per calendar year 2026 per license, for a total of $245,000
vi. $50,000 per calendar year 2027 per license, for a total of $350,000, and every subsequent year. The annual license maintenance fees in a given year will be credited against any running royalty payments due.
(ii) the Company will pay a running royalty of 4% of net sales by the Company or its affiliates (the 4% royalty shall be reduced by ½ of royalties paid to third parties but shall not be less than 3.5%).
(iii) the Company will pay 20% of any non-royalty payments received by the Company from sub-licensed products,
(iv) the Company may purchase the 4% running royalty on six (6) licenses for $12,000,000 in four equal 1% increments.
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HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
10. MANAGEMENT OF CAPITAL
The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern (see Note 1). The Company does not have any externally imposed capital requirements to which it is subject.
As at September 30, 2025, the Company had capital resources consisting of all components of shareholders' equity. 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. To maintain or adjust the capital structure, the Company may attempt to issue common shares.
11. FINANCIAL INSTRUMENTS
Fair values
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value, by reference to the reliability of the inputs used to estimate the fair values:
The Company classifies its fair value measurements in accordance with the three-level fair value hierarchy as follows:
- 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 (i.e. as prices) or indirectly (i.e. derived from prices).
- Level 3: Inputs that are not based on observable market data.
As at September 30, 2025, the Company's financial instruments consisted of cash, accounts receivable, tax receivable, accounts payable and accrued liabilities and other liabilities. Cash is measured at fair value in accordance with Level 1. The fair value of accounts receivable, tax receivable, accounts payable and accrued liabilities and other liabilities approximate their carrying values because of the short-term nature of these instruments.
Financial risk management objectives and policies
The risks associated with financial instruments and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.
(i) Currency risk
The Company is exposed to currency risk by having balances and transactions in currencies that are different from its functional currencies. The Company has balances and transactions in United States Dollars, Canadian Dollars and British Pounds. The Company does not use derivative instruments to reduce upward and downward risk associated with foreign currency fluctuations. Cash balances were held in the following currencies at September 30, 2025:
| US Dollars | Canadian Dollars | British Pounds | |
|---|---|---|---|
| Cash | 271,890 | 10,900,194 | 369,660 |
At September 30, 2025, with other variables unchanged, a 5% movement in the US dollar against the Canadian Dollar and British Pound would change the Company's net loss and comprehensive loss by approximately $563,000.
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HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
(ii) Interest rate risk
The Company is exposed to interest rate risk on the variable rate of interest earned on bank deposits. The fair value interest rate risk on bank deposits is insignificant as the deposits are short-term. The Company has not entered into any derivative instruments to manage interest rate fluctuations.
(iii) 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 primary exposure to credit risk is on its cash held in bank accounts and financial institutions. This risk is managed by using major banks and financial institutions that are high credit quality financial institutions as determined by rating agencies. The Company's secondary exposure to risk is on its receivables. The risk is minimal as receivables consist primarily of refundable government taxes.
(iv) Liquidity risk
In the management of liquidity risk, the Company maintains a balance between continuity of funding and development activity. Management closely monitors the liquidity position and expects to have adequate sources of funding to finance the Company's projects and operations.
At September 30, 2025, the contractual maturities of the Company's obligations are as follows:
| Within one year $ | Between one and five years $ | More than five years $ | |
|---|---|---|---|
| Accounts payable and accrued liabilities | 2,932,979 | - | - |
| Other liabilities | - | 66,000 | - |
| Lease obligation | 62,444 | - | - |
- SUPPLEMENTAL CASH FLOW INFORMATION
| 2025 | 2024 | |
|---|---|---|
| $ | $ | |
| Supplemental cash flow information: | ||
| Cash received for interest | 63,335 | 17,974 |
| Transfer of value from reserves on exercise of warrants | 2,829,192 | 39,000 |
| Transfer of value from reserves on exercise of options | 868,681 | - |
| Issue costs - warrants | 62,103 | 118,685 |
- INCOME TAXES
The following table reconciles the amount of income tax recoverable during the years ended September 30, 2025 and 2024 on application of the combined statutory federal and provincial income tax rates for Canada at September 30, 2025 of 27.00% (2024 – 27.00%):
| 2025 | 2024 | |
|---|---|---|
| $ | $ | |
| Loss before income taxes | (8,149,292) | (5,331,986) |
| Combined statutory rate | 27% | 27% |
| Income tax recovery at statutory tax rate | (2,200,309) | (1,439,636) |
| Increase (decrease) in taxes: |
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HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
| Permanent differences | 231,399 | 108,510 |
|---|---|---|
| Effect of change in tax rates | 120,190 | 109,310 |
| Change in unrecognized deductible temporary differences | 1,848,720 | 1,221,816 |
| Deferred income tax recovery | - | - |
The Company recognizes tax benefits on losses or other deductible amounts where the probability criteria for the recognition of deferred tax assets has been met. The Company's unrecognized deductible temporary differences and unused tax losses for which no deferred tax assets is recognized consists of the following amounts:
| 2025 | 2024 | |
|---|---|---|
| $ | $ | |
| Non-capital loss carryforward | 21,511,000 | 13,738,000 |
| Other | (107,000) | - |
| Fixed assets | 701,000 | 374,000 |
| Share issue costs | 523,000 | 636,000 |
| Leases | 15,000 | 21,000 |
| 22,643,000 | 14,769,000 |
The Company's non-capital losses carried forward for Canadian income tax purposes expire in various years from 2037 to 2044. Non-capital losses may be applied against future taxable income and capital losses are deductible against future capital gains, if any. The Company's tax loss carried forward for United States and United Kingdom income tax purposes may be utilized and carried forward indefinitely to offset future taxable income, with certain limitations.
The losses expire as follows:
| Canada $ | United States $ | United Kingdom $ | Total $ | |
|---|---|---|---|---|
| 2037 | 28,000 | - | - | 28,000 |
| 2038 | 87,000 | - | - | 87,000 |
| 2039 | 85,000 | - | - | 85,000 |
| 2040 | 158,000 | - | - | 158,000 |
| 2041 | 1,414,000 | - | - | 1,414,000 |
| 2042 | 1,907,000 | - | - | 1,907,000 |
| 2043 | 1,872,000 | - | - | 1,872,000 |
| 2044 | 1,154,000 | - | - | 1,154,000 |
| 2045 | 3,544,000 | - | - | 3,544,000 |
| Indefinite | - | 10,039,000 | 1,223,000 | 11,262,000 |
| 10,249,000 | 10,039,000 | 1,223,000 | 21,511,000 |
14. SUBSEQUENT EVENTS
Exercise of warrants
Subsequent to September 30, 2025, the Company issued 6,710,810 common shares upon exercise of warrants at an average price of CAD$0.21 per share for gross proceeds of CAD$1,439,103.
Exercise of stock options
Subsequent to September 30, 2025, the Company issued 925,000 common shares upon exercise of stock options at an average price of CAD$0.20 per share for gross proceeds of CAD$183,250.
24 | Page
HYDROGRAPH CLEAN POWER INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2025 AND 2024
(Expressed in United States Dollars unless otherwise stated)
Settlement
On October 28, 2025, the Company issued 750,000 common shares at the fair value of CAD$2.90 per share or CAD$2,925,000 ($2,095,470) in settlement of a commercial dispute. As at September 30, 2025, the Company recognized a settlement fee expense and accrued liability of $2,095,470.
LIFE financing
On November 4, 2025, the Company completed a listed issuer financing exemption ("LIFE") private placement of 6,896,560 units at a price of CAD$2.90 per unit for gross proceeds of CAD$20,000,024 ($14,194,017). Each unit consists of one common share and one-half of one common share purchase warrant. Each whole warrant will entitles the holder thereof to purchase one common share at a price of CAD$3.50 up to November 4, 2028.
In connection with the private placement, the Company issued 401,794 finders' warrants, incurred $968,883 in cash finders' fees and advisory fees. Each finders' warrant is exercisable into one common share at price of CAD$3.50 up to November 4, 2028.
The warrants and finders; warrants are subject to an acceleration right (the "Warrant Acceleration Right") exercisable by the Company, if on any ten consecutive trading days the daily volume weighted average trading price of the common shares on the Canadian Securities Exchange is CAD$7.00 or greater per common share. If the Company exercises its Warrant Acceleration Right, the new expiry date of the warrants will be the 30th day following the notice of such exercise.
Stock option and RSU grant
On December 5, 2025, the Company granted 1,194,220 stock options to employees, consultants and officers of the Company at an exercise price of CAD$3.02 up to December 5, 2030. In addition, the Company granted 54,184 RSUs to an employee.
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