IMPACT SILVER CORP — Interim / Quarterly Report 2022

May 9, 2022

IMPACT SILVER CORP.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

March 31, 2022 and 2021

Unaudited

NOTICE OF NO REVIEW BY AUDITOR

In accordance with National Instrument 51 – 102 Continuous Disclosure Obligations of the Canadian Securities Administrators WE HEREBY GIVE NOTICE THAT the condensed consolidated interim financial statements which follow this notice have not been reviewed by an auditor.

IMPACT Silver Corp.

Condensed Consolidated Interim Statements of Financial Position

(Canadian dollars) Unaudited

ASSETS	March 31, 2022 December 31, 2021
Current Cash Trade and other receivables_(Note 3) Inventories(Note 4) Investments Right-of-use assets(Note 5) Property, plant and equipment (Note 7) Exploration and evaluation assets(Note 8)_	$ 19,132,465 $ 21,081,575 2,774,069 1,736,262 989,892 1,071,797 305,000 85,000
	23,201,426 23,974,634 240,220 266,738 20,589,908 19,820,400 22,749,662 22,481,941
	$ 66,781,216 $ 66,543,713

LIABILITIES
Current Trade payables and accrued liabilities Lease liabilities_(Note 6) Lease liabilities(Note 6)_ Reclamation provision Deferred income tax liabilities SHAREHOLDERS' EQUITY	$ 1,979,319 $ 2,365,921 87,217 89,228
	2,066,536 2,455,149 131,784 154,597 689,392 669,043 3,496,651 3,298,993
	6,384,363 6,577,782
Share capital Warrants(Note 11(c)) Contributed surplus Accumulated other comprehensive loss Accumulated deficit	81,278,502 81,122,078 2,631,375 2,666,279 8,897,500 8,897,500 (7,738,341) (8,107,947) (24,672,183) (24,611,979)
	60,396,853 59,965,931
	$ 66,781,216 $ 66,543,713

Nature of operations (Note 1)

ON BEHALF OF THE BOARD:

“F.W. Davidson” , Director “P. Tredger” , Director

-The accompanying notes form an integral part of these consolidated financial statements-

IMPACT Silver Corp. Condensed Consolidated Interim Statements of Loss For the Three Months Ended March 31

(Canadian dollars) Unaudited

	2022 2021
Revenue Cost of sales Operating expenses_(Note 10) Amortization and depletion Mine operating income General and administrative expenses Accounting, audit and legal Amortization Investor relations, promotion and travel Management fees and consulting Office, rent, insurance and sundry Office salaries and services Share-based payments(Note 11(b))_ Operating income Other income (expenses) Finance cost Finance income Foreign exchange gain (loss) Other expense Income before taxes Current income tax expense Deferred income tax expense Net loss	$ 4,628,620 $ 5,375,860 3,569,195 3,431,094 305,148 278,163
	3,874,343 3,709,257
	754,277 1,666,603
	40,409 52,403 7,611 10,788 16,023 15,103 105,077 78,210 102,737 121,578 283,399 182,437 - 943,511
	555,256 1,404,030
	199,021 262,573
	(17,413) (12,019) 18,693 33,792 (90,356) 82,998 (3,960) (8,126)
	(93,036) 96,646
	105,985 359,219 2,040 91,981 164,149 524,579
	$ (60,204) $ (257,341)
Loss per share – Basic and Diluted Weighted average number of shares outstanding – Basic and Diluted	$ (0.00) $ (0.00)
	145,515,860 143,308,379

-The accompanying notes form an integral part of these consolidated financial statements-

IMPACT Silver Corp.

Condensed Consolidated Interim Statements of Comprehensive Loss For the Three Months Ended March 31

(Canadian dollars) Unaudited

	2022 2021
Net loss Other comprehensive loss Items that may be subsequently reclassified to profit or loss Cumulative translation adjustment Items that will not be subsequently reclassified to profit or loss Loss on investments Comprehensive income (loss)	$ (60,204) $ (257,341) 389,606 (1,400,143) (20,000) (10,000)
	$ 309,402 $ (1,667,484)

-The accompanying notes form an integral part of these consolidated financial statements-

IMPACT Silver Corp.

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity For the Three Months Ended March 31

(Canadian dollars) Unaudited

For the Three Months Ended March 31 (Canadian dollars) Unaudited
Shares Outstanding	Share Capital ($) Warrants ($) Contributed Surplus ($) Accumulated Other Comprehensive Income ($) Retained Deficit ($)	Total Shareholders’ Equity ($) 58,689,049 (257,341) 943,511 750,770 135,350 (1,400,143) (10,000) 58,851,196 59,965,931 (60,204) 121,520 389,606 (20,000)
Balance at January 1, 2021 141,410,247 Net loss for the period - Share-based compensation expense - Warrants exercised 2,172,272 Stock options exercised 230,000 Cumulative translation adjustments - Loss on investments -	79,325,168 2,954,251 7,523,552 (7,047,278) (24,066,644) - - - - (257,341) - - 943,511 - - 905,035 (154,265) - - - 233,127 - (97,777) - - - - - (1,400,143) - - - - (10,000) -
Balance at March 31, 2021 143,812,519	80,463,330 2,799,986 8,369,286 (8,457,421) (24,323,985)
Balance at January 1, 2022 145,381,485 Net loss for the period - Warrants exercised 355,379 Cumulative translation adjustments - Loss on investments -	81,122,078 2,666,279 8,897,500 (8,107,947) (24,611,979) - - - - (60,204) 156,424 (34,904) - - - - - - 389,606 - - - - (20,000) -
Balance atMarch31,2022 145,736,864	81,278,502 2,631,375 8,897,500 (7,738,341) (24,672,183)	60,396,853

• The accompanying notes form an integral part of these consolidated financial statements –

IMPACT Silver Corp.

Condensed Consolidated Interim Statements of Cash Flows

For the Three Months Ended March 31

(Canadian dollars) Unaudited

Cash resources provided by (used in)	2022 2021
Operating activities Net loss Items not affecting cash Amortization and depletion Share-base payments Deferred income tax expense Accretion expense Unrealized loss on foreign exchange Changes in non-cash working capital Trade and other receivables Income taxes receivable Inventories Trade payables Income taxes payable Investing activities Proceeds on the sale of long-lived assets Additions of long-lived assets Financing activities Repayment of lease liability Proceeds from the exercise of warrants Proceeds from the exercise of stock options Net change in cash Cash - Beginning of period Cash - End of period	$ (60,204) $ (257,341) 312,759 288,951 - 943,511 164,149 524,579 12,704 10,798 (2,652) (112,242) (891,608) (372,225) (3,836) (1,386) 91,702 474,938 (493,049) (223,175) (18,472) 3,380
	(888,507) 1,279,788
	100,000 50,000 (1,257,057) (829,934)
	(1,157,057) (779,934)
	(25,067) (22,524) 121,521 750,770 - 135,350
	96,454 863,596
	(1,949,110) 1,363,450 21,081,575 20,385,551
	$ 19,132,465 $ 21,749,001

-The accompanying notes form an integral part of these consolidated financial statements-

IMPACT Silver Corp.

Notes to the Condensed Consolidated Interim Financial Statements March 31, 2022 (Canadian dollars) Unaudited

1. Nature of operations

IMPACT Silver Corp. and its subsidiaries (collectively, “IMPACT” or the “Company”) are engaged in silver mining and related activities including exploration, development and mineral processing in Mexico. The Company operates a series of mines near Zacualpan in the State of Mexico and in Guerrero State and produces silver, lead, zinc and gold sold in the form of lead and zinc concentrates. The registered address of the Company is 303 – 543 Granville Street, Vancouver, British Columbia.

The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that the current exploration and development programs will result in ongoing profitable mining operations. The investment in and expenditures on exploration and evaluation assets comprise a significant portion of the Company’s assets. The recovery of the Company’s investment in these exploration and evaluation assets and the attainment of profitable operations are dependent upon future commodity prices, the ongoing discovery and development of economic ore on these properties and the ability to arrange sufficient financing to bring the ore estimates into production. The ultimate outcome of these matters cannot presently be determined because they are contingent on future events.

The consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business as they come due into the foreseeable future. The Company estimates that it has adequate financial resources for the next twelve months.

2. Basis of Preparation

Statement of compliance

The Company’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). These unaudited condensed interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting. All material intercompany balances have been eliminated. The accounting policies applied in the preparation of these unaudited condensed financial statements are consistent with those applied and disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2021.

IMPACT Silver Corp.

Notes to the Condensed Consolidated Interim Financial Statements March 31, 2022

(Canadian dollars) Unaudited

2. Basis of Preparation – continued

As all the disclosures required by IFRS are not included, these interim statements should be read in conjunction with the audited financial statements of IMPACT Silver Corp. (“the Company”) for the year ended December 31, 2021.

Except when otherwise stated, all amounts are presented in Canadian (“CDN”) dollars, which is the presentation currency of the Company.

The condensed consolidated interim financial statements were authorised for issue by the Board of Directors on May 26, 2022.

3. Trade and other receivables

The following table details the composition of trade and other receivables at:

Value added taxes receivable Trade and other receivables Prepaids	March 31, 2022 December 31, 2021
	$ 1,119,733 $ 935,620 1,416,601 550,843 237,735 249,799
	$ 2,774,069 $ 1,736,262

4. Inventories

The following table details the composition of inventories at:

Materials and supplies Stockpile inventory Concentrate inventory	March 31, 2022 December 31, 2021
	$ 680,407 $ 488,951 124,035 89,895 185,450 492,951
	$ 989,892 $ 1,071,797

IMPACT Silver Corp.

Notes to the Condensed Consolidated Interim Financial Statements March 31, 2022

(Canadian dollars) Unaudited

5. Right-of-use assets

Details are as follows:

Balance at January 1, 2021 Additions Amortization Foreign exchange movement Balance at December 31, 2021 Amortization Foreign exchange movement Balance at March 31, 2022	Land
	$ 103,475 261,775 (96,554) (1,958)
	266,738 (27,018) 500
	$ 240,220

6. Lease Liabilities

Details are as follows:

Balance at January 1, 2021 Interest Repayments Additions Foreign exchange movement Balance at December 31, 2021 Interest Repayments Foreign exchange movement Balance at March 31, 2022 Less: current portion Non-current lease liabilities	$ 78,669 9,711 (102,949) 261,775 (3,381)
	243,825
	4,715 (29,782) 243
	219,001 87,217
	$ 131,784

The Company’s leased assets are for office leases and land. The lease liabilities were discounted at the Company’s incremental borrowing rate. The weighted average rate applied at January 1, 2019 was 8.0%.

IMPACT Silver Corp. Notes to the Condensed Consolidated Interim Financial Statements March 31, 2022

(Canadian dollars) Unaudited

6. Lease Liabilities - continued

The expected timing of undiscounted lease payments is as follows:

Less than one year $ One to five years $	March 31, 2022 December 31, 2021
	108,378 $ 112,244 134,045 157,825
	242,423 $ 270,069

7. Property, plant and equipment

Details are as follows:

Cost Balance at January 1, 2021 Additions Change in reclamation estimate Foreignexchangemovement	Plant and Mine equipment ($) Vehicles ($) Office furniture and equipment ($) Surface rights ($) Mining Assets ($)	Total ($)
	9,287,104 498,017 232,246 1,052,133 28,116,715 470,315 86,812 51,844 - 1,826,239 - - - - (112,170) (285,856) (15,165) (3,650) (32,036) (719,762)	39,186,215 2,435,210 (112,170) (1,056,469)
Balance at December 31, 2021 Additions Foreignexchangemovement	9,471,563 569,664 280,440 1,020,097 29,111,022 205,856 29,761 11,308 - 604,358 106,105 6,330 1,394 11,336 273,757	40,452,786 851,283 398,922
Balance at March31, 2022	9,783,524 605,755 293,142 1,031,433 29,989,137	41,702,991
Accumulated amortization Balance at January 1, 2021 Amortization for the period Foreign exchange movement	6,887,506 401,125 174,837 - 12,420,151 355,524 31,166 29,969 - 834,986 (213,477) (11,748) (3,142) - (274,511)	19,883,619 1,251,645 (502,878)
Balance at December 31, 2021 Amortization for the period Foreign exchange movement	7,029,553 420,543 201,664 - 12,980,626 85,036 9,125 4,936 - 191,119 79,210 4,673 1,180 - 105,418	20,632,386 290,216 190,481
Balance at March 31, 2022	7,193,799 434,341 207,780 - 13,277,163	21,113,083
Net book value
AtDecember31,2021	2,442,010 149,121 78,776 1,020,097 16,130,396	19,820,400
At March 31, 2022	2,589,725 171,414 85,362 1,031,433 16,711,974	20,589,908

IMPACT Silver Corp.

Notes to the Condensed Consolidated Interim Financial Statements March 31, 2022

(Canadian dollars) Unaudited

8. Exploration and evaluation assets

Balance at January 1, 2021	$	21,871,603
Additions		1,269,902
Recoveries		(135,000)
Write-down		(33,451)
Foreign exchange		(491,113)
Balance at December 31, 2021		22,481,941
Additions		424,242
Recoveries		(340,000)
Foreign exchange		183,479
Balance at March 31, 2022	$	22,749,662

9. Key management personnel compensation

Key management includes the Chief Executive Officer, Chief Financial Officer, Vice-President Exploration and Board of Directors and Audit Committee members. The remuneration of directors and other members of key management personnel for the three months ended March 31 is as follows:

Salaries and fees Share-based compensation	2022 2021
	$ 154,850 $ 118,812 - 581,310
	$ 154,850 $ 700,122

10. Expenses by nature

The following table details the nature of expenses within cost of goods sold for the three months ended March 31:

Production costs Administration Transportation Wages and salaries	2021 2021
	$ 1,894,735 $ 2,017,422 220,628 163,896 110,441 149,845 1,343,391 1,099,931
	$ 3,569,195 $ 3,431,094

11. Equity

a) Share capital

Authorised share capital consists of an unlimited number of common shares without par value.

IMPACT Silver Corp.

Notes to the Condensed Consolidated Interim Financial Statements March 31, 2022

(Canadian dollars) Unaudited

11. Equity – continued

b) Stock options

The Company has established a stock option plan whereby the board of directors may, from time to time, grant options to directors, officers, employees or consultants. Under the terms of the Company’s fixed stock option plan, the maximum number of shares reserved for issuance is 10% of the issued shares of the Company or 12,936,917 shares. Options granted must be exercised no later than five years from date of grant or extension or such lesser period as determined by the Company’s board of directors. The exercise price of an option is not less than the closing price on the TSX Venture Exchange on the last trading day preceding the grant.

On January 18, 2021 the Company granted stock options under its Stock Option Plan to directors, officers, employees and consultants exercisable for 2,110,000 shares of the Company. The options are exercisable on or before January 18, 2026 at a price of $0.90 per share. Options vested 100% on the date granted.

On October 8 2021, the Company granted stock options under its Stock Option Plan to directors, officers, employees and consultants exercisable for 2,300,000 shares of the Company. The options are exercisable on or before October 8, 2026 at a price of $0.48 per share. Options vested 100% on the date granted.

The Black Scholes Option Pricing Model was used to estimate the fair value of stock options for calculating stockbased compensation expense. The Company recognized a stock-based compensation expense and an increase to contributed surplus based on a grading vesting schedule using the following assumptions:

Date Granted	January 18, 2021	October 8, 2021
Number of options granted	2,110,000	2,300,000
Risk-free interest rate	0.14%	0.60%
Expected dividend yield	Nil	Nil
Expected share price volatility	84.516%	80.312%
Expected option life in years	2.50	2.50

IMPACT Silver Corp.

Notes to the Condensed Consolidated Interim Financial Statements March 31, 2022

(Canadian dollars) Unaudited

11. Equity – continued

b) Stock options – continued

The expected volatility is based on the historical and implied volatility of the Company’s common share price on the TSX Venture Exchange. The risk-free interest rate assumption is based on the Bank of Canada marketable bonds with a remaining term equal to the stock options’ expected life. Option pricing models require the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options.

The total fair value of share-based payment expense on stock options granted to employees and consultants of the Company for the three months ended March 31, 2022 is $nil (March 31, 2021 – $943,511).

A summary of the Company’s stock options as at March 31, 2022 and the changes for the periods ended on these dates is as follows:

is as follows:
		Weighted Average
	Number	Exercise Price ($)
At January 1, 2021	4,610,000	0.57
Granted	4,410,000	0.68
Exercised	(230,000)	0.59
Expired	(1,470,000)	0.98
Forfeited	(100,000)	0.90
At March 31, 2022 and December 31, 2021	7,220,000	0.55

The following	table summarizes information	about the stock options	outstanding at March 31,	2022:
Exercise		Weighted Average
Price	Number of Options	Remaining Life	Number of Options
PerShare	Outstanding	(Years)	Exercisable	ExpiryDate
$0.35	1,160,000	0.47	1,160,000	September 20,2022
$0.36	1,750,000	2.57	1,750,000	October 24,2024
$0.90	2,010,000	3.81	2,010,000	January 18, 2-26
$0.48	2,300,000	4.53	2,300,000	October 8, 2026
	7,220,000	3.20	7,220,000

IMPACT Silver Corp.

Notes to the Condensed Consolidated Interim Financial Statements March 31, 2022

(Canadian dollars) Unaudited

11. Equity – continued

c) Warrants

A summary of the Company’s warrants as at March 31, 2022 and the changes for the periods ended on these dates is as follows:

follows:
		Weighted Average
	Number	Exercise Price ($)
At January 1, 2021	22,302,751	0.58
Exercised	(3,741,238)	0.34
At December 31, 2021	18,561,513	0.63
Exercised	(355,379)	0.34
At March 31, 2022	18,206,134	0.71

12. Segmented information

The Company has one operating segment and two reportable segments based on geographic area:

i) Mexico – This part of the business includes the Company’s mining operations and exploration properties ii) Canada – This part of the business includes head office and group services

The segments are determined based on the reports reviewed by the Chief Executive Officer (who is considered the Chief Operating Decision Maker) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available.

Details for the three months ended March 31 are as follows:

Details for the three months ended March 31 are as follows:
	2022 2021
Revenue by geographic area Mexico Net loss by geographic area Mexico Canada Assets by geographical area Mexico Canada Property, plant and equipment by geographical area Mexico Canada	$ 4,628,620 $ 5,375,860
	$ 400,568 $ 1,042,231 (460,772) (1,299,572)
	$ (60,204) $ (257,341)
	March 31, December 31, 2022 2021
	$ 48,876,795 $ 47,791,460 17,904,421 18,752,253
	$ 66,781,216 $ 66,543,713
	$ 20,528,861 $ 19,760,847 61,047 59,553
	$ 20,589,908 $ 19,820,400