Kermode Resources Ltd. — Annual Report 2022

Feb 27, 2023

KERMODE RESOURCES LTD.

FINANCIAL STATEMENTS (Expressed in Canadian Dollars)

FOR THE YEARS ENDED OCTOBER 31, 2022 and 2021

KERMODE RESOURCES LTD.

TABLE OF CONTENTS

Independent Auditor’s Report Financial Statements Statements of Financial Position Statements of Loss and Comprehensive Loss Statements of Changes in Shareholders’ Equity (Deficiency) Statements of Cash Flows Notes to the Financial Statements	PAGE 4-5 6 7 8 9 10-27

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Kermode Resources Ltd.

Opinion

We have audited the accompanying financial statements of Kermode Resources Ltd. (the “Company”), which comprise the statements of financial position as at October 31, 2022 and 2021, and the statements of loss and comprehensive loss, changes in shareholders’ equity (deficiency), and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at October 31, 2022 and 2021, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the 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 in our audit is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 of the financial statements, which indicates that the Company incurred ongoing losses. As stated in Note 1, these events and conditions 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.

Other Information

Management is responsible for the other information. The other information obtained at the date of this auditor's report includes Management’s Discussion and Analysis.

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

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, 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, 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.

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

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

In preparing the 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 Financial Statements

Our objectives are to obtain reasonable assurance about whether the 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 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 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 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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

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

The engagement partner on the audit resulting in this independent auditor’s report is Peter Maloff.

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Vancouver, Canada February 24, 2023

Chartered Professional Accountants

KERMODE RESOURCES LTD. Statements of Financial Position (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

	October 31,	October 31,
	2022	2021
Assets
Current assets
Cash	30,041	93,664
Receivables	3,573	8,887
Prepaid expenses	25,486	73,915
Total current assets	59,100	176,466
Exploration and evaluation assets (Note 5)	218,040	94,225
Total assets	277,140	270,691
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 6)	246,982	432,613
Advancespayable(Note 3)	29,808	29,808
Total current liabilities	276,790	462,421
Shareholders’ equity (deficiency)
Share capital (Note 7)	10,100,588	9,434,521
Contributed surplus (Note 8)	138,776	102,255
Deficit	(10,239,014)	(9,728,506)
Total shareholders’ equity (deficiency)	350	(191,730)
Total liabilities and shareholders’ equity (deficiency)	277,140	270,691

Nature of business and going concern (Note 1) Subsequent events (Note 13)

Approved and authorized by the Board on February 24, 2023.

“Maxime Lepine” “Milo Mielinczuk”

____ _______ Director Director

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

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KERMODE RESOURCES LTD. Statements of Loss and Comprehensive Loss (Expressed in Canadian Dollars) For the years ended October 31, 2022 and 2021

		2022	2021
Operating expenses
Consulting	$	12,000 $	37,877
Directors fees (Note 6)		-	19,505
Management fees (Note 6)		16,000	4,877
Office and sundry (Note 6)		6,301	15,485
Professional fees (Note 6)		52,050	23,284
Property investigation		97,221	-
Rent (Note 6)		-	7,744
Shareholder communications		-	879
Share-based compensation (Note 8)		72,634	102,255
Telephone		-	6,738
Transfer agent and filingfees		44,821	16,928
		301,027	235,572
Loss (gain) on settlement of debt (Note 4)		132,167	(65,399)
Write-down of exploration and evaluation assets (Note 5)		117,026	-
Loss and comprehensive loss	$	550,220$	170,173
Basic and diluted loss per share		(0.01)	(0.00)
Weighted average number of common shares outstanding, basic and
diluted		108,861,184	79,150,798

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

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KERMODE RESOURCES LTD. Statements of Changes in Shareholders’ Equity (Deficiency) (Expressed in Canadian Dollars) For the years ended October 31, 2022 and 2021

	Number of				Contributed		Accumulated
	Shares		Share Capital		Surplus		Deficit		Total
Balance, October 31, 2020	65,397,373	$	9,185,432	$	-	$	(9,558,333)	$	(372,901)
Private placement	25,000,000		250,000		-		-		250,000
Shares issued for property	100,000		4,000		-		-		4,000
Share issue costs	-		(4,911)		-		-		(4,911)
Share-based compensation	-		-		102,255		-		102,255
Loss and comprehensive loss	-		-		-		(170,173)		(170,173)
Balance, October 31, 2021	90,497,373	$	9,434,521	$	102,255	$	(9,728,506)	$	(191,730)
Private placement	9,652,600		241,315		-		-		241,315
Shares issued for property	10,500,000		165,000		-		-		165,000
Shares issued for debt	8,980,197		269,406		-		-		269,406
Share issue costs	-		(6,055)		-		-		(6,055)
Share based compensation	-		-		72,634		-		72,634
Stock options cancelled	-		-		(39,712)		39,712		-
Broker warrants	-		(3,599)		3,599		-		-
Loss and comprehensive loss	-		-		-		(550,220)		(550,220)
	119,630,170		10,100,588		138,776		(10,239,014)		350

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

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KERMODE RESOURCES LTD. Statements of Cash Flows (Expressed in Canadian Dollars) For the years ended October 31, 2022 and 2021

		2022	2021
Operating activities
Loss and comprehensive loss for the year	$	(550,220) $	(170,173)
Items not affecting cash:
Share-based compensation		72,634	102,255
Loss (gain) on debt settlement		132,167	(65,399)
Write-down of exploration and evaluation assets		117,026	-
Change in non-cash working capital items:
Receivables		5,314	78,498
Prepaid expense		48,429
Accountspayable and accrued liabilities		(48,392)	29,023
Net cash used in operatingactivities		(223,042)	(25,796)
Financing activities
Issuance of common shares, net of issue costs		235,260	112,589
Net cashprovided byfinancingactivities		235,260	112,589
Investing activities
Investment in and expenditures on exploration and evaluation assets		(75,841)	(52,060)
Net cash used in investingactivities		(75,841)	(52,060)
Change in cash for the year		(63,623)	34,733
Cash, beginning ofyear		93,664	58,931
Cash, end ofyear	$	30,041 $	93,664
Supplemental schedule of non-cash transactions:
Shares issued for mineral property acquisition (Note 7)		165,000	4,000
Exploration and evaluation expenditures included in accounts payable and
accrued liabilities		-	38,165
Shares issued in settlement of debts		269,406	-
Finders’ warrants		3,599	-

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

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KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

1. NATURE OF BUSINESS AND GOING CONCERN

Kermode Resources Ltd. (the "Company") was incorporated under the laws of the Province of Alberta and was subsequently continued into British Columbia.

The Company is primarily engaged in the business of acquiring, exploring and transacting in mineral exploration properties located in Canada and the USA. There has been no determination whether properties held contain economically recoverable mineral resources.

The Company’s shares are listed on the TSX Venture Exchange (“TSX-V”). The Company’s registered and records office is 1 – 505 Fisgard Street, Victoria, British Columbia, Canada.

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred ongoing losses. A number of alternatives including, but not limited to completing a financing, are being evaluated with the objective of funding ongoing activities and obtaining additional working capital. The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future and repay its liabilities arising from normal business operations as they become due. These material uncertainties may cast significant doubt about the Company’s ability to continue as a going concern.

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2. SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

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

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

Basis of presentation

The financial statements of the Company have been prepared on a historical cost basis. In addition, these financial statements have been prepared using the accrual basis of accounting except for cash flow information.

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KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

2. SIGNIFICANT ACCOUNTING POLICIES – continued

Financial instruments

Financial instruments are measured on initial recognition at fair value, plus, in the case of financial instruments other than those classified as fair value through profit or loss ("FVTPL"), directly attributable transaction costs. Financial instruments are recognized when the Company becomes party to the contracts that give rise to them and are classified as amortized cost, fair value through profit or loss or fair value through other comprehensive income, as appropriate.

Financial assets at FVTPL

Financial assets at FVTPL include financial assets held for trading and financial assets not designated upon initial recognition as amortized cost or fair value through other comprehensive income ("FVOCI"). A financial asset is classified in this category principally for the purpose of selling in the short term, or if so designated by management. Transaction costs are expensed as incurred. On initial recognition, a financial asset that otherwise meets the requirements to be measured at amortized cost or FVOCI may be irrevocably designated as FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Financial assets measured at FVTPL are measured at fair value with changes in fair value recognized in the statements of loss and comprehensive loss.

Financial assets at FVOCI

On initial recognition of an equity investment that is not held for trading, an irrevocable election is available to measure the investment at fair value upon initial recognition plus directly attributable transaction costs and at each period end, changes in fair value are recognized in other comprehensive income ("OCI") with no reclassification to the statements of operations. The election is available on an investment-by-investment basis. Investments in equity securities, where the Company cannot exert significant influence, are designated as financial assets at FVOCI.

Financial assets at amortized cost

A financial asset is measured at amortized cost if it is held within a business model whose objective is to hold assets to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, and is not designated as FVTPL. Financial assets classified as amortized cost are measured subsequent to initial recognition at amortized cost using the effective interest method.

Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Gains and losses are recognized in loss when the liabilities are derecognized as well as through the amortization process. Borrowing liabilities are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date. Accounts payable and accrued liabilities are classified as and measured at amortized cost.

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KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

2. SIGNIFICANT ACCOUNTING POLICIES – continued

De-recognition of financial assets and liabilities

A financial asset is derecognised when either the rights to receive cash flows from the asset have expired or the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party. If neither the rights to receive cash flows from the asset have expired nor the Company has transferred its rights to receive cash flows from the asset, the Company will assess whether it has relinquished control of the asset or not. If the Company does not control the asset then derecognition is appropriate. A financial liability is derecognised when the associated obligation is discharged or canceled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in profit or loss.

Impairment of financial assets

A loss allowance for expected credit losses is recognized in profit or loss for financial assets measured at amortized cost. At each statement of financial position date, on a forward-looking basis, the Company assesses the expected credit losses associated with its financial assets carried at amortized cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. The impairment model does not apply to FVTPL instruments.

The expected credit losses are required to be measured through a loss allowance at an amount equal to the 12- month expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date) or full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument). A loss allowance for full lifetime expected credit losses is required for a financial instrument if the credit risk of that financial instrument has increased significantly since initial recognition.

Financial instruments recorded at fair value:

The fair value of quoted investments is determined by reference to market prices at the close of business on the statement of financial position date. Where there is no active market, fair value is determined using valuation techniques. These include using recent arm’s length market transactions; reference to the current market value of another instrument which is substantially the same; discounted cash flow analysis; and, pricing models.

Financial instruments that are measured at fair value subsequent to initial recognition are grouped into a hierarchy based on the degree to which the fair value is observable as follows:

• Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

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

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KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

2. SIGNIFICANT ACCOUNTING POLICIES – continued

Exploration and evaluation assets

The Company is in the exploration stage with respect to its investment in mineral properties and accordingly follows the practice of capitalizing all costs relating to the acquisition of, exploration for and development of mineral properties. Such costs include, but are not limited to, geological, geophysical studies, exploratory drilling and sampling. The aggregate costs related to abandoned mineral properties are charged to profit or loss at the time of any abandonment or when it has been determined that there is evidence of a permanent impairment. An impairment charge relating to a mineral property is subsequently reversed when new exploration results or actual or potential proceeds on sale or farmout of the property result in a revised estimate of the recoverable amount but only to the extent that this does not exceed the original carrying value of the property that would have resulted if no impairment had been recognized.

The recoverability of amounts shown for exploration and evaluation assets is dependent upon the discovery of economically recoverable reserves, the ability of the Company to obtain financing to complete development of the properties, and on future production or proceeds of disposition.

The Company recognizes in income costs recovered on mineral properties when amounts received or receivable are in excess of the carrying amount.

All capitalized exploration and evaluation assets are monitored for indications of impairment. Where a potential impairment is indicated, assessments are performed for each area of interest. To the extent that exploration and evaluation assets are not expected to be recovered, they are charged to profit or loss. Exploration areas where reserves have been discovered, but require major capital expenditure before production can begin, are continually evaluated to ensure that commercial quantities of reserves exist or to ensure that additional exploration work is underway as planned.

Restoration, rehabilitation and environmental obligations

A legal or constructive obligation to incur restoration, rehabilitation and environmental costs may arise when environmental disturbance is caused by the exploration, development or ongoing production of a mineral property interest. Such costs arising from the decommissioning of a plant and other site preparation work, discounted to their net present value, are provided for and capitalized to the carrying amount of the asset, as soon as the obligation to incur such costs arises. Discount rates using a pre-tax rate that reflects the time value of money are used to calculate the net present value. The related liability is adjusted for each period for the unwinding of the discount rate and for changes to the current market based discount rate, amount or timing of the underlying cash flows needed to settle the obligation.

Impairment of non-financial assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash generating unit to which the assets belong.

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KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

2. SIGNIFICANT ACCOUNTING POLICIES – continued

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in net loss.

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

Provisions

A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated. 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.

Share-based compensation

The fair value of options granted to employees at the date of grant is recognized as an expense over the vesting period with a corresponding increase in contributed surplus. An individual is classified as an employee when the individual is an employee for legal or tax purposes or provides services similar to those performed by a direct employee, including directors of the Company.

In situations where options are issued to non-employees and some or all of the goods or services received by the Company as consideration cannot be specifically identified, the unidentified goods or services received (or to be received) are measured as the difference between the fair value of the share-based payment transaction and the fair value of any identified goods or services received at the grant date.

The fair value is measured at the grant date and recognized over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option-pricing model, taking into account the terms and conditions upon which the options were granted. At the end of each reporting period, the amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest. Share-based compensation incorporates an expected forfeiture rate.

All equity settled share-based compensation is reflected in contributed surplus, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in contributed surplus is credited to share capital, adjusted for any consideration paid. If an option is not exercised prior to its expiration, the amount previously reflected in contributed surplus is credited to retained earnings (deficit).

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KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

2. SIGNIFICANT ACCOUNTING POLICIES – continued

Income taxes

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

Deferred tax is recorded using the liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for relating to goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting or taxable loss, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the statement of financial position date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, it does not recognize that excess.

Flow-through shares

The Company will, from time to time, issue flow-through common shares to finance a significant portion of its exploration program. Pursuant to the terms of the flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates the flow-through share into i) a flow-through share premium, equal to the estimated premium if any received from the investor, which is recognized as a liability, and ii) share capital. Upon expenses being incurred, the Company derecognizes the liability and recognizes the amount as other income for the amount of tax reduction renounced to the shareholders. Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian resource property exploration expenditures within a two-year period. Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian resource property exploration expenditures within a two-year period.

The Company may also be subject to a Part XII.6 tax on flow-through proceeds renounced under the LookBack Rule, in accordance with Government of Canada flow-through regulations.

Comprehensive loss

Comprehensive loss is the change in the Company’s net assets that results from transactions, events and circumstances from sources other than the Company’s shareholders and includes items that are not included in profit or loss.

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KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

2. SIGNIFICANT ACCOUNTING POLICIES – continued

Critical areas of judgment and estimation uncertainty

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods presented. These judgments and estimates are continuously evaluated and are based on management’s experience and knowledge of the relevant facts and circumstances. Actual results may differ from the amounts included in the audited financial statements.

Areas of significant judgment and estimates affecting the amounts recognized in the audited financial statements include:

(i) Impairment of non-financial assets

Assets are reviewed for an indication of impairment at each date of the statement of financial position. This determination requires significant judgment. Factors which could trigger an impairment review include, but are not limited to, significant negative industry or economic trends, interruptions in exploration and evaluation activities and significant drop in precious metal prices.

• (ii) Valuation of share-based compensation

The Company records all share-based compensation using the fair value method. The Company uses the Black-Scholes model to determine the fair value of stock options. The main factor affecting the estimates of the fair value of stock options is the volatility used. The Company currently estimates the expected volatility of its common shares based on the trading history of the Company taking into consideration the expected life of the options.

Loss per share

Basic loss per share is computed by dividing the loss for the year by the weighted average number of common shares outstanding during the year, including contingently issuable shares which are included when the conditions necessary for the issuance have been met. Diluted earnings per share is calculated in a similar manner, except that the weighted average number of common shares outstanding is increased to include potentially issuable common shares from the assumed exercise of common share purchase options and warrants, if dilutive. The number of additional shares included in the calculation is based on the treasury stock method for options and warrants. Diluted loss per share does not include the effect of potentially issuable common shares if their effect is anti-dilutive.

Share capital

Financial instruments issued by the Company are classified as equity only to the extent they do not meet the definition of a financial liability or financial asset. The Company’s common shares and flow-through shares are classified as equity instruments. Incremental costs directly attributable to the issuance of equity instruments are recognized as a deduction from the proceeds in equity in the period where the transaction occurs.

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KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

2. SIGNIFICANT ACCOUNTING POLICIES – continued

Adoption of new accounting standards

Future changes in accounting policies

Amendment to IAS 1, Presentation of Financial Statements - Classification of Liabilities as Current or NonCurrent - In January 2020, the IASB issued amendments to paragraphs 69-76 of IAS 1 to clarify the requirements for classifying liabilities as current or non-current. The amendments specify that the conditions which exist at the end of a reporting period are those which will be used to determine if a right to defer settlement of a liability exists. The amendments also clarify the situations that are considered a settlement of a liability. The amendments are effective January 1, 2022, with early adoption permitted.

The amendments are not expected to have an impact on the Company’s financial statements.

3. ADVANCES PAYABLE

During the year ended October 31, 2021, the Company advanced funds to/from a management company, owned by a spouse of a former director. The management company incurred administration expenditures and settled certain exploration expenditures on behalf of the Company. The balance payable as at October 31, 2022 of $29,808 (2021 - $29,808) is due to a company with common former directors and is non-interest bearing, unsecured with no specified terms of repayment.

4. LOSS (GAIN) ON SETTLEMENT OF DEBT

During the year ended October 31, 2022, the Company issued 8,980,197 common shares valued at $269,406 in settlement of $137,239 in debts resulting in a loss on settlement of $132,167. During the year ended October 31, 2021, the Company settled debt of $65,399 for $nil proceeds resulting in the gain on settlement of debt of $65,399.

17

KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

5. EXPLORATION AND EVALUATION ASSETS

		Little Bay	Lucky	Star of the	Star of the	Vidette
	Eastgate	Copper	Strike		West	Lake		Total
Balance, October 31, 2020	$ -	$ -	$ -	$	-	$ -	$	-
Acquisition Costs	6,030	-	-		-	9,000		15,030
Prospecting	20,000	-	-		-	59,195		79,195
Staking	-	-	-		-	-		-
Fees & licenses	-	-	-		-	-		-
Write down	-	-	-		-	-		-
Balance, October 31, 2021	$ 26,030	$ -	$ -	$	-	$ 68,195	$	94,225
Acquisition Costs	-	42,000	135,000		-	10,000		187,000
Prospecting	-	-	19,517		12,117	10,000		41,634
Staking	-	-	3,576		5,830	-		9,406
Fees & licenses	2,801	-	-		-	-		2,801
Write down	(28,831)	-	-		-	(88,195)		(117,026)
Balance, October 31, 2022	$ -	$ 42,000	$ 158,093	$	17,947	$ -	$	218,040

Title to mineral properties

Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral properties. The Company has investigated title to all of its mineral properties and, to the best of its knowledge, title to all of its properties are in good standing.

The Company has not yet determined if the exploration and evaluation assets contain economic ore recoveries.

Vidette Lake Gold Project property, British Columbia

On May 23, 2020, the Company entered into an option agreement with Strata GeoData Services Ltd. to acquire a 100% interest in the Vidette Lake gold project in British Columbia.

During the year ending October 31, 2021, the Company paid $5,000 in cash, issued 100,000 common shares valued at $4,000, and incurred $59,195 of exploration expenditures.

During the year ended October 31, 2022, the Company paid $10,000 in cash.

To exercise the option, the Company was required to pay an additional $20,000 in cash, issue an additional 400,000 common shares of the Company, and expend an additional of $165,000 in exploration over the next 2 years.

18

KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

5. EXPLORATION AND EVALUATION ASSETS – continued

During the year ended October 31, 2022, the Company decided not to proceed with the option agreement, consequently the costs of $88,195 were written off to operations.

Eastgate Property, Nevada USA

The Company holds a 15% interest in the Eastgate Gold Property, which is comprised of mineral claims located northeast of the Rawhide Mine, and east of Fallon in Churchill, County, Nevada.

On April 3, 2012, the Company entered into a mineral property option and joint venture agreement with Blue Ridge Gold LLC. On January 3, 2017, the Company elected not to acquire any additional interest in the property and provided notice to Blue Ridge Gold LLC that the Company required a joint venture be formed between the parties.

Due to challenges and continued delays in coordinating exploration, the Company wrote off the costs of $28,831 in the year ended October 31, 2022.

Little Bay Copper, Newfoundland

On April 11, 2022, the Company entered into an option agreement with Grassroots Prospecting and Prospect Generation Inc. to acquire a 100% interest in the Little Bay Copper project in Newfoundland.

Pursuant to the option agreement, the Company issued 1,500,000 common shares valued at $30,000 and paid cash of $12,000 during the year ended October 31, 2022. To exercise the option, the Company must pay an additional $250,000 within 48 months of closing, and issue common shares and incur exploration expenditures as follows:

Date	Number of common shares to be issued	Exploration expenditures
12 months following closing	3,000,000	$ 100,000
24 months following closing	6,000,000	250,000
36 months following closing	7,500,000	400,000
48 months following closing	15,000,000	3,500,000
	31,500,000	$4,250,000

On exercise of the option, there will be a 2% net smelter returns royalty with a buy-back of 1% for $2,000,000.

Lucky Strike, British Columbia

On July 20, 2022, the Company entered into an option agreement to acquire a 100% interest in the Lucky Strike Copper project in British Columbia.

Pursuant to the option agreement, the Company issued 9,000,000 common shares valued at $135,000. To exercise the option, the Company must issue an additional 9,000,000 common shares within 12 months following closing and 9,000,000 common shares within 24 months following closing.

On exercise of the option, there will be a 2% net smelter return royalty payable to the vendor group, where each one percent can be bought down for $1,000,000.

19

KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

5. EXPLORATION AND EVALUATION ASSETS – continued

Star of the West, British Columbia

On October 28, 2022, the Company entered into an option agreement to acquire a 100% interest in the Star of the West project in British Columbia. To exercise the option, the Company must register the following:

• i) a 2.5% net smelter return royalty with a total buy-down of $5,000,000 where each 0.5% can be purchased form the vendors for $1,000,000 and;

• ii) a 30% sales participation n right of the gross proceeds of any future transaction where the Company sells the property in the next ten years.

The option agreement does not require any payment of cash common shares or work commitments by the Company.

6. RELATED PARTY TRANSACTIONS AND BALANCES

The Company had the following transactions in the normal course of operations with related parties:

		October 31, 2022	October 31, 2021
Director fees	$	- $	19,505
Management fees (i)		16,000	8,630
Office rent and supplies		-	7,500
Professional fees		-	38,000

• i) The Company paid or accrued $16,000 (2021 - $8,630) in management fees to the CFO of the Company. Management fees were paid to the holding company of the CFO, Nadon Professional Corporation.

Key management personnel of the Company are Directors, Chief Executive Officer and the Chief Financial Officer.

Accounts payable and accrued liabilities includes $116,419 (2021 - $213,146) due to current and former officers and directors and a company controlled by a current officer. These amounts are unsecured, noninterest bearing and have no fixed terms of repayment.

7. SHARE CAPITAL

Authorized share capital

As at October 31, 2022, the authorized share capital of the Company is an unlimited number of common shares without par value. All issued shares, consisting only of common shares, are fully paid.

20

KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

7. SHARE CAPITAL – continued

Issued share capital

As at October 31, 2022, the Company had 119,630,170 common shares issued and outstanding.

Share issuances

For the year ended October 31, 2022, the Company completed the following transactions:

• (i) On December 7, 2022, the Company issued 8,980,197 common shares valued at $269,406 in settlement of debt totalling $137,238, resulting in a loss on settlement of $132,167 (Note 4).

• (ii) On February 9, 2022, the Company issued 9,652,600 units at $0.025 per unit for gross proceeds of $241,315 pursuant to a private placement. Each unit consisted of one common share and one warrant to acquire an additional common share exercisable at $0.05 per warrant, expiring February 9, 2024. The Company issued 160,000 finder’s warrants, exercisable at $0.05 per common share expiring February 9, 2024. The finders’ warrants were valued at $3,599 using the Black-Scholes option pricing model with the following assumptions: a risk-free interest rate of 1.12%; a volatility of 182%; an expected life of 2 years; a forfeiture rate of zero; and an expected dividend of zero. The Company incurred additional share issuance costs of $6,054.

• (iii) On April 26, 2022, the Company issued 1,500,000 common shares valued at $30,000 pursuant to the option to acquire the Little Bay Copper property (Note 5).

• (iv) On July 20, 2022, the Company issued 9,000,000 shares valued at $135,000 pursuant to the option to acquire the Lucky Strike property (Note 5).

For the year ended October 31, 2021, the Company completed the following transactions:

• (i) On April 14, 2021, the Company issued 25,000,000 common shares at $0.01 per common shares for gross proceeds of $250,000, of which $132,500 was received by the Company during the year ended October 31, 2020. The Company incurred share issuance costs of $4,911.

• (ii) On April 14, 2021, the Company issued 100,000 common shares valued at $4,000 pursuant to the option to acquire the Vidette Lake property (Note 5).

8. SHARE-BASED PAYMENTS

The Company adopted an equity incentive plan to govern the grant, administration and exercise of Security Based Compensation which may be granted to eligible Participants. The maximum number of Shares issuable under this Plan shall not exceed the aggregate of (i) for Options, 10% of the number of Issued Shares of the Corporation outstanding as of the date of each grant hereunder, inclusive of all Shares then reserved for issuance pursuant to previously granted stock options, and (ii) for all other Awards, 10% of the number of Issued Shares of the Corporation outstanding as of the date where the plan was adopted. The plan was adopted September 19th, 2022 and allows for 11,963,017 Awards other than stock options to be issued. Under the plan, the exercise price of each option shall be equal or greater than the closing market price of the Company’s stock on the day prior to the date of grant. These options are subject to approval from the TSX-V, can be granted for a maximum term of 10 years, and vest at the discretion of the Board of Directors.

21

KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

8. SHARE-BASED PAYMENTS – continued

Awards that may be granted under this Plan include Options; Performance Share Units; Stock Appreciation Rights and Stock Purchase Rights.

The following table summarizes the continuity of the Company’s stock options:

			Weighted Average
	Number of Options		Exercise Price
Balance October 31, 2021	5,000,000	$	0.05
Exercised	-		-
Cancelled	(2,000,000)		0.05
Granted	3,000,000		0.05
Balance October 31, 2022	6,000,000		0.05
			Weighted Average
	Number of Options		Exercise Price
Balance October 31, 2020	-	$	-
Exercised	-		-
Cancelled	-		-
Granted	5,000,000		0.05
Balance October 31, 2021	5,000,000		0.05

At October 31, 2022, the Company had outstanding stock options, enabling holders to acquire common shares as follows:

Number of options	Number of options
outstanding	exercisable	Exerciseprice		Expiry date
3,000,000	3,000,000	$	0.05	September 24, 2026
1,000,000	1,000,000		0.05	February 15, 2027
1,000,000	1,000,000		0.05	April 5, 2027
1,000,000	1,000,000		0.05	August 26, 2027

The weighted average contractual life of the options outstanding at October 31, 2022 is 4.21 years (2021 – 4.9 years).

The total number of options exercisable as at October 31, 2022 is 6,000,000 (October 31, 2021 – 5,000,000).

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KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

8. SHARE-BASED PAYMENTS – continued

The fair value of the options granted during the years ended October 31, 2022 and 2021 was determined using the Black-Scholes option pricing model using the following inputs:

	Risk-free
	interest	Expected	Volatility	Dividend
Grant date	rate	life	factor	yield
September 24, 2021	0.25%	5 years	250%	0%
February 15, 2022	0.25%	5 years	195%	0%
April 5, 2022	0.25%	5 years	198%	0%
August 26, 2022	0.25%	5 years	198%	0%

9. WARRANTS

The following common share purchase warrants entitle the holders thereof the right to purchase one common share for each common share purchase warrant. Warrant transactions and the number of share purchase warrants outstanding as at October 31, 2022 are summarized as follows:

Private placement Finder’s warrants	Number Number Exercise Expiry Outstanding Outstanding Price Date October 31, 2021 October 31, 2022
	$0.05 February 9, 2024 - 9,652,600 $0.05 February 9, 2024 - 160,000

There were no warrants outstanding as at October 31, 2021.

10. INCOME TAXES

A reconciliation of income taxes (recovery) at statutory rates with the reported taxes for the years ended October 31, 2022 and 2021 are is as follows:

		2022		2021
Loss beforeincome taxes	$	(550,220)	$	(170,173)
Expected income tax (recovery)		(149,000)		(46,000)
Change in statutory rates and other		3,000		28,000
Permanent differences		20,000		10,000
Share issue costs		(2,000)		(1,000)
Adjustment to prior year provision versus statutory tax returns		2,000		(22,000)
and expiry of non-capital losses
Change in unrecognized deductible temporary differences		126,000		31,000
Income tax recovery	$	-	$	-

23

KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

10. INCOME TAXES – continued

The significant components of the Company’s temporary differences, unused tax credits and unused tax losses that have not been included on the statement of financial position are as follows:

			Expiry Date
		2022	Range	2021
Temporary Differences
Exploration and evaluation assets	$	1,667,000	No expiry date	$ 1,559,000
Investment tax credit		5,000	2031 to 2033	5,000
Property and equipment		-	No expiry date	14,000
Share issue costs		8,000	2042 to 2045	4,000
Allowable capital losses		97,000	No expiry date	97,000
Non-capital losses availablefor future periods		4,833,000	2026 to2042	4,465,000
Canada		4,833,000	2026 to 2042	4,465,000
USA		-		-

11. FINANCIAL AND CAPITAL RISK MANAGEMENT

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

Level 3 – Inputs that are not based on observable market data.

The Company has made the following designations of its financial instruments:

Cash Amortized cost Receivables Amortized cost Advances payable Amortized cost Accounts payable and accrued liabilities Amortized cost

The fair value of the Company’s advances payable and accounts payable and accrued liabilities approximate their carrying values due to the short-term nature of these instruments.

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

Credit risk

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

24

KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

11. FINANCIAL AND CAPITAL RISK MANAGEMENT – continued

Liquidity risk

The Company’s approach to managing liquidity risk is addressed in Note 1. As at October 31, 2022, the Company had a cash balance of $30,041 available to settle current liabilities of $276,790. All of the Company’s financial liabilities are subject to normal trade terms.

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices. These fluctuations may be significant.

a) Interest rate risk

The Company has cash balances held with financial institutions. The Company’s current policy is to invest excess cash in short-term treasury bills issued by the Government of Canada and its banking institutions. The Company periodically monitors the investments it makes and is satisfied with the credit ratings of its banks.

• b) Foreign currency risk

The Company does not have any balances denominated in a foreign currency and believes it has no significant foreign currency risk.

• c) Price risk

The Company is exposed to price risk with respect to commodity prices. Changes in commodity prices will impact the economics of development of the Company’s mineral properties. The Company closely monitors commodity prices to determine the appropriate course of action to be taken.

Capital management

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition and exploration of mineral properties. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company defines capital that it manages as shareholders’ equity (deficiency).

The properties in which the Company currently has an interest are in the exploration stage; as such the Company has historically relied on the equity markets to fund its activities. Current financial markets are very difficult and there is no certainty with respect to the Company’s ability to raise capital. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

The Company currently is not subject to externally imposed capital requirements. There were no changes in the Company’s approach to capital management.

25

KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

12. SEGMENTED INFORMATION

The Company operates in one segment, being the acquisition, exploration and evaluation of mineral properties in Canada and the United States (Note 5).

October31,2022	Canada	United States	Total
Mineral properties	$218,040	$ -	$218,040
October 31, 2021
Mineral properties	$ 68,195	$ 26,030	$ 95,225

13. SUBSEQUENT EVENTS

On November 1, 2022, the Company granted 1,196,301 charitable stock options to The Singh Foundation, exercisable at $0.05 for a period of five years from grant date.

On November 2, 2022, the Company granted 1,000,000 performance share units to Castlewood Capital Corporation as a consultant. The units vest after one year and are exercisable for three years from grant date.

On November 4, 2022, the Company granted 3,000,000 performance share units to three independent directors of the company, Maxime Lepine, Peter Clausi, and Milo Mielniczuk. Each person received 1,000,000 units. The units vest immediately and are exercisable for three years from grant date.

On December 12, 2022, the Company optioned the Caycuse Copper project located on Vancouver Island, British Columbia. To initiate the option, the Company issued 15,000,000 shares at fair value of $0.01 per share for total value of $150,000. To complete the option agreement, the Company is obligated to issue 5,000,000 shares on or before each anniversary for nine years, such that the each share payment is limited so the recipient Justin Deveault does not get more than 9.9% of the total issued & undiluted shares of the Company at any time. In addition, the option agreement includes a 1% net smelter return royalty, where 1% can be bought-down for $1,000,000 entirely or in part, and a 10% sales participation right for any transaction in the next ten years.

On November 29, 2022, the Company grated 3,000,000 performance share units to certain consultants. The units vest after one year and are exercisable for three years from grant date.

On December 12, 2022, the Company optioned the Loup Creek property. To earn 100% ownership of the project, the Company must assign the vendors a net smelter return royalty and a sales participation right as described below. The net smelter return royalty is set at 2% with a buy-down of $2,000,000 to reduce the royalty to zero. The sales participation right is set at 20% for a period of 10 years, where the right is calculated as a percentage of the gross proceeds from any transaction whereby the Company sells any interest in Loup Creek.

26

KERMODE RESOURCES LTD. Notes to the Financial Statements (Expressed in Canadian Dollars) As at October 31, 2022 and 2021

13. SUBSEQUENT EVENTS – continued

On December 13, 2022, the Company optioned the Grey Copper & Jonathan’s Pond project. To initiate the option, the Company issued 7,000,000 shares at a fair value of $0.01 per share for total value of $70,000. To complete the option agreement, the Company is obligated to issue 3,000,000 shares on each of the first and second anniversaries. In addition, the option agreement includes a 2% net smelter return royalty, where 1% can be bought-down for $1,000,000 entirely or in part. There are no spending obligations or work commitments.

On February 14, 2023 the Company issued 1,712,978 common shares pursuant to shares-for-services agreements with exploration services providers in British Columbia and Newfoundland and Labrador.

27