LANCASTER RESOURCES INC.

Consolidated Financial Statements

For the Years Ended March 31, 2025 and 2024

(Expressed in Canadian Dollars)

SATURNAGROUP CHARTERED PROFESSIONAL ACCOUNTANTS LLP

Suite 1605, 1166 Alberni Street Vancouver, BC Canada V6E 3Z3

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Lancaster Resources Inc.

Opinion

We have audited the consolidated financial statements of Lancaster Resources Inc. (formerly Lancaster Lithium Inc.) (the "Company"), which comprise the consolidated statements of financial position as at March 31, 2025 and 2024, and the consolidated statements of operations and comprehensive loss, changes in shareholders' equity (deficit), 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 financial position of the Company as at March 31, 2025 and 2024, and its financial performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IFRS").

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 audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 in the consolidated financial statements, which indicates that the Company has not generated any revenues, incurred negative cash flows from operations of $89,788, and incurred a net loss of $1,548,884 during the year ended March 31, 2025 and, as of that date, the Company has a working capital deficit of $1,945,213 and an accumulated deficit of $8,874,122. 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 for the year ended March 31, 2025. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Except for the matter described in the Material Uncertainty Related to Going Concern section of our report, we have determined that there are no key audit matters to communicate in our report.

Other Information

Management is responsible for the other information. The other information comprises the information included in the Management's Discussion and Analysis, but does not include the consolidated financial statements and our auditor's report thereon.

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

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, 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 Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, 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.
Obtain sufficient appropriate audit evidence regarding the financial information for the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter of 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 Henry Chow.

SATURNA GROUP LLP

Saturna Group Chartered Professional Accountants LLP

Vancouver, Canada

July 28, 2025

Lancaster Resources Inc.
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)

| | Notes | March 31, 2025
$ | March 31, 2024
$ |
| --- | --- | --- | --- |
| Current assets: | | | |
| Cash and cash equivalents | | 27 | 52,219 |
| Marketable securities | 5 | 13,954 | 83,183 |
| Amounts receivable | | 38,270 | 38,546 |
| Prepaid expenses and deposits | | - | 104,592 |
| Total current assets | | 52,251 | 278,540 |
| Non-current assets: | | | |
| Exploration and evaluation assets | 6 | 38,870 | 440,785 |
| Total assets | | 91,121 | 719,325 |
| Current liabilities: | | | |
| Accounts payable and accrued liabilities | 7 | 713,289 | 216,113 |
| Due to related parties | 7 | 15,729 | 3,954 |
| Flow-through premium | 9 | 75,000 | 75,000 |
| Convertible debentures | 3, 8 | 1,193,446 | 1,037,150 |
| Total liabilities | | 1,997,464 | 1,332,217 |
| Shareholders' deficit: | | | |
| Share capital | 9 | 4,701,571 | 4,480,736 |
| Shares issuable | 9 | 54,000 | 30,000 |
| Share subscriptions receivable | | (28,000) | - |
| Share-based equity reserve | 9,11,12 | 2,243,530 | 2,204,932 |
| Deficit | | (8,874,122) | (7,328,560) |
| Total shareholders' deficit attributed to Lancaster Resources Inc. shareholders | | (1,903,021) | (612,892) |
| Deficit attributed to non-controlling interest in Nelson Lake | | (3,322) | - |
| Total shareholders' deficit | | (1,906,343) | (612,892) |
| Total liabilities and shareholders' deficit | | 91,121 | 719,325 |

Nature of operations and continuance of business (Note 1)
Subsequent events (Note 18)

Approved and authorized for issuance on behalf of the Board of Directors on July 28, 2025:

/s/ "Anderw Watson"
Director

/s/ "Penny White"
Director

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

Lancaster Resources Inc.

Consolidated Statements of Operations and Comprehensive Loss

(Expressed in Canadian Dollars)

	Notes	Year ended March 31,
		2025 $	2024 $
Expenses:
Consulting	7	265,838	485,366
Investor relations		104,564	113,841
Marketing, publicity, and digital media		411,819	302,186
Office and administrative		17,385	58,441
Professional fees		69,495	119,113
Research and development		327	2,021
Share-based compensation	7,11,12	131,348	670,634
Transfer agent and filing fees		61,589	91,060
Travel and entertainment		1,719	30,151
Wages and benefits	7	-	28,615
Total expenses		1,064,084	1,901,428
Loss before other items		(1,064,084)	(1,901,428)
Other items:
Accretion of discounts on convertible debentures	8	(56,690)	(110,109)
Excess of consideration paid on acquisition	3	-	(1,476,370)
Foreign exchange loss		(2,309)	(5,393)
Gain on disposal of exploration and evaluation assets	6	29,192	-
Gain on settlement of accounts payable		136,236	-
Impairment of exploration and evaluation assets	6	(404,702)	-
Interest expense		(99,607)	-
Other expense		(10,520)	(24,996)
Realized loss on marketable securities	5	(24,205)	-
Unrealized loss on marketable securities	5	(52,195)	(20,075)
Write-off of amounts receivable		-	(70,085)
Total other items		(484,800)	(1,707,028)
Net loss and comprehensive loss		(1,548,884)	(3,608,456)
Net loss and comprehensive loss attributable to:
The Company's shareholders		(1,535,100)	(3,608,456)
Non-controlling interest		(13,784)	-
		(1,548,884)	(3,608,456)
Net loss per share attributable to the Company's shareholders, basic and diluted		(0.03)	(0.08)
Weighted average of shares outstanding, basic and diluted		55,693,809	45,074,151

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

Lancaster Resources Inc.

Consolidated Statements of Changes in Shareholders' Deficit

(Expressed in Canadian Dollars)

	Share capital		Shares Issuable $	Share subscription receivable $	Share-based equity reserves $	Deficit $	Non-controlling interest $	Total shareholders equity (deficit) $
	Number of shares	Amount $
Balance, March 31, 2023	38,796,861	3,275,881	70,000	-	1,459,209	(3,751,706)	-	1,053,384
Units and shares issued for cash	9,121,000	633,050	(70,000)	-	-	-	-	563,050
Flow-through share premium	-	(75,000)	-	-	-	-	-	(75,000)
Acquisition of Lancaster Lithium Inc.	3,036,011	607,202	-	-	18,312	-	-	625,514
Modification of broker warrants	-	(117,861)	-	-	117,861	-	-	-
Shares issued for debt	545,000	27,250	-	-	-	-	-	27,250
Shares issued for services	280,000	14,000	-	-	-	-	-	14,000
Shares to acquire mineral properties	135,000	20,250	-	-	-	-	-	20,250
Share issued for the exercise of warrants	300,000	111,688	-	-	(66,688)	-	-	45,000
Shares issued for the exercise of stock options	100,000	28,679	-	-	(13,679)	-	-	15,000
Shares issuance costs	-	(44,403)	-	-	19,283	-	-	(25,120)
Share subscriptions received	-	-	30,000	-	-	-	-	30,000
Share-based compensation	-	-	-	-	670,634	-	-	670,634
Net loss for the year	-	-	-	-	-	(3,608,456)	-	(3,608,456)
Deconsolidation of dissolved subsidiaries	-	-	-	-	-	31,602	-	31,602
Balance, March 31, 2024	52,313,872	4,480,736	30,000	-	2,204,932	(7,328,560)	-	(612,892)
Units issued for cash	600,000	30,000	(30,000)	-	-	-	-	-
Shares issued for debt	2,089,000	45,335	-	-	-	-	-	45,335
Shares issued for cash	560,000	28,000	-	(28,000)	-	-	-	-
Share issued through plan of arrangement	550,000	24,750	-	-	-	-	-	24,750
Shares issued for the conversion of RSUs	3,290,000	92,750	-	-	(92,750)	-	-	-
Obligation to issue shares	-	-	54,000	-	-	-	-	54,000
Share-based compensation	-	-	-	-	131,348	-	-	131,348
Net loss for the year	-	-	-	-	-	(1,535,100)	(13,784)	(1,548,884)
Dividends declared	-	-	-	-	-	(10,462)	10,462	-
Balance, March 31, 2025	59,402,872	4,701,571	54,000	(28,000)	2,243,530	(8,874,122)	(3,322)	(1,906,343)

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

Lancaster Resources Inc.
Consolidated Statements of Cashflows
(Expressed in Canadian Dollars)

Year ended March 31,
	2025
$	2024
$
Operating activities:
Net loss for the year	(1,548,884)	(3,608,456)
Items not involving cash:
Accretion of discounts on convertible debentures	56,690	110,109
Excess of consideration paid on acquisition	-	1,476,370
Gain from sale of exploration and evaluation assets	(29,193)	-
Gain from settlement of accounts payable	(136,236)	-
Impairment of exploration and evaluation assets	404,702	-
Interest accrued for convertible debentures	99,607	80,380
Realized gain on marketable securities	24,205	-
Share-based compensation	131,348	670,634
Shares issued for services	-	14,000
Stock options received for other income	-	(63,556)
Unrealized loss on marketable securities	52,195	20,075
Write-off of amounts receivable	-	70,085
Changes in non-cash operating working capital:
Amounts receivable	276	20,360
Prepaid expenses and deposits	104,592	69,328
Accounts payable and accrued liabilities	739,135	(1,409)
Due to related parties	11,775	10,920
Net cash used in operating activities	(89,788)	(1,131,160)
Investing activities:
Acquisition of exploration and evaluation assets	(3,352)	(174,405)
Cash paid for the exercise of stock options	(40,005)	-
Cash received on acquisitions	-	138,255
Proceeds from the sale of exploration and evaluation assets	15,000	-
Proceeds from the sale of marketable securities	65,953	-
Net cash provided by (used in) investing activities	37,596	(36,150)
Financing activities:
Proceeds from issuance of units and shares	-	563,050
Proceeds from exercise of share purchase warrants	-	45,000
Proceeds from exercise of stock options	-	15,000
Share issuance costs	-	(25,120)
Share subscriptions received	-	30,000
Net cash provided by financing activities	-	627,930
Change in cash and cash equivalents	(52,192)	(539,380)
Cash and cash equivalents, beginning of year	52,219	591,599
Cash and cash equivalents, end of year	27	52,219

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

Lancaster Resources Inc.

Notes to the Consolidated Financial Statements

Years Ended March 31, 2025 and 2024

(Expressed in Canadian Dollars)

1. Nature of Operations and Continuance of Business

Lancaster Resources Inc. (the "Company") was incorporated under the laws of the province of British Columbia on September 18, 2019. On April 9, 2020, the Company changed its name to NeonMind Biosciences Inc. The Company was previously engaged in drug development research into potential therapeutic uses of psychedelic compounds. On December 30, 2020, the Company completed an initial public offering and the Company's common shares were listed on the Canadian Securities Exchange (the "Exchange"). On June 7, 2023, the Company changed its name to Lancaster Resources Inc. On June 9, 2023, the Company completed a reverse takeover ("RTO") transaction with Lancaster Lithium Inc. ("Lancaster Lithium") (Note 3), whereby the former shareholders of Lancaster Lithium became the controlling shareholders of the Company and Lancaster Lithium became a wholly-owned subsidiary of the Company, and the Company changed its business from drug development to exploration of energy transition metals. On June 14, 2023, the Company's common shares resumed trading on the Exchange under the ticker symbol "LCR".

These consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes that the Company will be able to realize its assets and satisfy its liabilities in the normal course of business for the foreseeable future. Management is aware, in making its going concern assessment, of material uncertainties related to events and conditions that may cast significant doubt upon the Company's ability to continue as a going concern. During the year ended March 31, 2025, the Company had no revenues, incurred a net loss of $1,548,884, and incurred negative cash flow from operations of $89,788. As at March 31, 2025, the Company has a working capital deficit of $1,945,213 and an accumulated deficit of $8,874,122. The continued operations of the Company are dependent on future profitable operations, management's ability to manage costs, and the future availability of equity or debt financing. Whether and when the Company can generate sufficient operating cash flows to pay for its expenditures and settle its obligations as they fall due is uncertain. These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and statement of financial position classifications that would be necessary were the going concern assumption be inappropriate. The impact of those adjustments to the consolidated financial statements could be material.

2. Material Accounting Policy Information

Statement of Compliance

These consolidated financial statements have been prepared on a historical cost basis. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for the cash flow information. The presentation and functional currency of the Company is the Canadian dollar. In the opinion of the Company's management, all adjustments considered necessary for a fair presentation have been included.

Basis of Presentation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Lancaster Lithium, and 40% owned subsidiary Nelson Lake Copper Corp ("Nelson Lake"). All intercompany balances and transactions have been eliminated on consolidation.

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

2. Material Accounting Policy Information (continued)

Significant Accounting Estimates and Judgments

The preparation of these consolidated financial statements in accordance with IFRS requires management to make judgments, estimates, and assumptions that affect the application of policies and reported amounts of assets, liabilities, income, and expenses. 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. Actual results may differ from these estimates.

Significant areas requiring the use of estimates include the carrying value of marketable securities, fair value of convertible debentures and share-based compensation, and measurement of unrecognized deferred income tax assets. Judgments made by management in the application of IFRS that have a significant effect on the consolidated financial statements include:

the application of the going concern assumption, which requires management to consider all available information about the future, which is at least but not limited to 12 months from the end of the reporting period;
the determination of whether a set of assets acquired and liabilities assumed in an acquisition constitutes a business may require the Company to make certain judgments, considering all facts and circumstances. A business is presumed to be an integrated set of activities and assets capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or economic benefits; and
judgment in determining whether it is likely that the future economic benefits are likely either from future exploitation or sale or where activities have not reached a stage which permits a reasonable assessment of the existence of reserves. The deferral policy requires management to make certain estimates and assumptions about future events or circumstances, in particular, whether an economically viable extraction operation can be established. Estimates and assumptions made may change if new information becomes available.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance, are readily convertible to known amounts of cash, and which are subject to insignificant risk of changes in value to be cash equivalents.

Loss Per Share

Basic loss per common share is computed by dividing their respective net income (loss) by the weighted average number of common shares outstanding during the year. The treasury stock method is used for the calculation of diluted loss per share, where all "in the money" stock options and share purchase warrants are assumed to have been exercised at the beginning of the period and the proceeds from their exercise are assumed to have been used to purchase common shares at the average market price during the period. When a loss is incurred during the period, the basic and diluted loss per share is considered anti-dilutive. As at March 31, 2025, the Company had 37,053,099 (2024 – 34,794,103) potentially dilutive shares outstanding.

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

2. Material Accounting Policy Information (continued)

Business Combinations

The Company evaluates acquisitions to determine whether it is a business combination or an asset acquisition. The Company accounts for business combinations under the acquisition method of accounting. The Company includes the results of operations of acquired businesses in its consolidated financial statements as of the respective dates of acquisition. The purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded to goodwill.

The determination of fair value requires considerable judgment and is sensitive to changes in the underlying assumptions. The Company's estimates are preliminary and subject to adjustment, which may result in material changes to the final valuation. During the measurement period, which will not exceed one year from closing, the Company may continue to obtain information to assist in finalizing the acquisition date fair values. Any qualifying changes to the preliminary estimates will be recorded as adjustments to the respective assets and liabilities, with any residual amounts allocated to goodwill. Acquisition costs are expensed as incurred, unless they qualify to be treated as debt issue costs, or as cost of issuing equity securities.

Asset acquisitions are accounted for using a cost accumulation model, with the cost of the acquisition allocated to the acquired assets based on their relative fair values. Goodwill is not recognized in an asset acquisition.

Financial Instruments

Under IFRS 9, financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 contains three primary measurement categories for financial assets: measured at amortized cost, fair value through other comprehensive income ("FVOCI"), and fair value through profit and loss ("FVTPL").

The following is the Company's accounting policy for financial instruments under IFRS 9:

Financial instrument	Classification under IFRS 9
Cash and cash equivalents	Amortized cost
Marketable securities	FVTPL
Accounts payable and accrued liabilities	Amortized cost
Due to related parties	Amortized cost
Convertible debentures	Amortized cost

Financial Assets

Financial instruments are initially measured at fair value. The classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets at FVTPL

Financial assets are classified as FVTPL when the financial asset is either held for trading or does not meet the criteria to be measured at amortized cost or at FVOCI. A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

2. Material Accounting Policy Information (continued)

Financial Instruments (continued)

Financial assets at amortized cost

Financial assets are measured at amortized cost if they are not designated at FVTPL, and the following conditions are met:

are non-derivative financial assets which are held within a business model whose objective is to hold assets to collect contractual cash flows and selling financial assets; and,
the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets are measured at amortized cost using the effective interest method, less any impairment.

Financial assets at FVOCI

Financial assets are measured at fair value through other comprehensive income only if they are not designated at FVTPL, and the following conditions are met:

it has been held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and,
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Impairment of financial assets

Financial assets, other than those classified as FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been decreased.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.

When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are offset against the allowance account. Changes in the carrying amount of the allowance account are recognized in the consolidated statement of operations. Loss allowances are based on the lifetime ECL's that result from all possible default events over the expected life of the trade receivable, using the simplified approach.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the consolidated statement of operations to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

Financial Liabilities

Financial liabilities (including loans and borrowings and trade payables and other liabilities) are initially measured at fair value, net of transaction costs. Subsequently, financial liabilities are measured at amortized cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

2. Material Accounting Policy Information (continued)

Financial Instruments (continued)

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized as the proceeds received, net of direct issue costs.

Impairment of non-financial assets

At the end of each reporting period, the Company reviews the carrying amounts of long-lived assets to determine whether there is an indication that those assets have suffered an impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment charge.

The recoverable amount used for this purpose is the higher of the 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 is estimated to be less than its recorded amount, the recorded amount of the asset is reduced to its recoverable amount. An impairment charge is recognized immediately in the consolidated statements of operations, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Exploration and Evaluation Expenditures

Exploration expenditures excluding acquisition costs and claim maintenance costs are capitalized. Costs incurred relating to the acquisition and claim maintenance of mineral properties, including option payments and annual fees to maintain the property in good standing are capitalized and deferred until the project to which they relate is sold, abandoned, impaired, or placed into production.

The Company assesses its exploration and evaluation assets for indications of impairment on each statement of financial position date and when events and circumstances indicate a risk of impairment. A property is written down or written off when the Company determines that an impairment of value has occurred or when exploration results indicate that no further work is warranted.

Impairment of exploration and evaluation assets

Exploration and evaluation assets are assessed for impairment when indicators and circumstances suggest that the carrying amount may exceed its recoverable amount. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment. 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 asset belongs. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm's length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in the consolidated statement of operations.

Industry-specific indicators for an impairment review arise typically when one of the following applies:

Substantive expenditure or further exploration and evaluation activities is neither budgeted nor planned;
Title to the asset is compromised, has expired, or is expected to expire;
Adverse changes in the taxation, regulatory or political environment;
Adverse changes in variables in commodity prices and markets making the project unviable; and
Variations in the exchange rate for the currency of operation.

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

2. Material Accounting Policy Information (continued)

Exploration and Evaluation Expenditures (continued)

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit "CGU") is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior years. A reversal of an impairment loss is recognized immediately in the consolidated statement of operations.

Reclamation and remediation provisions

The Company recognizes a provision for statutory, contractual, constructive, or legal obligations associated with decommissioning of mining operations and reclamation and rehabilitation costs arising when environmental disturbance is caused by the exploration or development of mineral properties, plant, and equipment. Provisions for site closure and reclamation are recognized in the period in which the obligation is incurred or acquired, and are measured based on expected future cash flows to settle the obligation, discounted to their present value. The discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability including risks specific to the countries in which the related operation is located.

When an obligation is initially recognized, the corresponding cost is capitalized to the carrying amount of the related asset in exploration and evaluation assets. These costs are depleted using either the unit of production or straight-line method depending on the asset to which the obligation relates.

The obligation is increased for the accretion and the corresponding amount is recognized as a finance expense. The obligation is also adjusted for changes in the estimated timing, amount of expected future cash flows, and changes in the discount rate. Such changes in estimates are added to or deducted from the related asset except where deductions are greater than the carrying value of the related asset in which case, the amount of the excess is recognized in the consolidated statement of operations.

Due to uncertainties concerning environmental remediation, the ultimate cost to the Company of future site restoration could differ from the amounts provided. The estimate of the total provision for future site closure and reclamation costs is subject to change based on amendments to laws and regulations, changes in technology, price increases, changes in interest rates, and as new information concerning the Company's closure and reclamation obligations becomes available.

Share-based Payments

The stock option plan allows Company employees and consultants to acquire shares of the Company. The grant date fair value of share options granted to employees is recognized as share-based compensation expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the share options. The amount recognized as an expense is adjusted to reflect the number of share options for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of share options that do meet the related service and non-market performance conditions at the vesting date. For share options with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

Where equity instruments are granted to parties other than employees, they are recorded by reference to the fair value of the services received. If the fair value of the services received cannot be reliably estimated, the Company measures the services received by reference to the fair value of the equity instruments granted, measured at the date the counterparty renders service.

All equity-settled share-based payments are reflected in share-based payment reserve, unless exercised. Upon exercise, shares are issued from treasury and the amount reflected in share-based payment reserve is credited to share capital, adjusted for any consideration paid.

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

2. Material Accounting Policy Information (continued)

Income Taxes

Current income tax:

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income tax:

Deferred income tax is provided using the statement of financial position method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only if it is probable that sufficient taxable income will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply when the asset is realized or the liability is settled, based on tax rates and laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income tax assets and liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority. Management has determined that the Company shall not recognize any deferred income tax assets due to the early stage of the business and the uncertainty regarding the future of the ability to generate income.

Recent Accounting Pronouncements

A number of new standards, and amendments to standards and interpretations, are not yet effective for the year ended March 31, 2025, and have not been early adopted in preparing these consolidated financial statements.

IFRS 18 Presentation and Disclosure in Financial Statements

In April 2024, the IASB issued IFRS 18 – Presentation and Disclosure in Financial Statements which will replace IAS 1, Presentation of Financial Statements. The key new concepts introduced in IFRS 18 relate to the structure of the statement of earnings (loss), required disclosures in the financial statements for certain earnings or loss performance measures that are reported outside an entity's financial statements and enhanced principles on aggregation and disaggregation which apply to the primary financial statements and notes in general. IFRS 18 will apply for reporting periods beginning on or after January 1, 2027, and also applies to comparative information. The Company is still in the process of assessing the impact of this standard on its consolidated financial statements.

Classification of liabilities as current or non-current (amendments to IAS 1, presentation of financial statements)

On January 23, 2020, an amendment was issued to IAS 1 to address inconsistencies with how entities apply the standards over classification of current and non-current liabilities. The amendment serves to address whether, in the statement of financial position, debt and other liabilities with an uncertain settlement should be classified as current or non-current. This amendment is effective on January 1, 2024. The Company adopted the amendment on the effective date and the adoption did not have a material impact on the Company's consolidated financial statements.

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

2. Material Accounting Policy Information (continued)

Recent Accounting Pronouncements (continued)

Non-current liabilities with covenants (amendments to IAS 1)

The amendments to IAS 1 specify that only covenants with which an entity is required to comply on or before the reporting date affect the classification of a liability as current or non-current. In addition, an entity has to disclose information in the notes that enables users of financial statements to understand the risk that non-current liabilities with covenants could become repayable within twelve months. The amendments are effective for annual reporting periods beginning on or after January 1, 2024, and are to be applied retrospectively. The Company adopted the amendment on the effective date and the adoption did not have a material impact on the Company's consolidated financial statements.

Amendments to the Classification and Measurement of Financial Instruments ("Amendments to IFRS 9 and IFRS 7")

In May 2024, the IASB issued Amendments to IFRS 9 and IFRS 7 which clarify the date of recognition and derecognition of some financial assets and liabilities with a new exception for some financial liabilities settled through an electronic cash transfer system, clarify and add further guidance for assessing whether a financial asset meets the solely payments of principal and interest criterion, add new disclosures for certain instruments with contractual terms that can change cash flows such as instruments with features linked to the achievement of environment, social and governance targets; and update the disclosures for equity instruments designated at FVOCI. Amendments to IFRS 9 and IFRS 7 is effective for periods beginning on or after January 1, 2026, with early adoption permitted. The Company is still in the process of assessing the impact of this standard on its consolidated financial statements.

3. Acquisition of Lancaster Lithium

On June 9, 2023, the Company completed a reverse takeover transaction (the "Transaction") pursuant to which it acquired all of the issued and outstanding common shares of Lancaster Lithium, a company incorporated in the province of British Columbia. Under the terms of the Transaction, the Company issued 39,476,861 common shares, 17,735,594 share purchase warrants, and 3,276,000 stock options in exchange for 100% of the issued and outstanding common shares, warrants, and options of Lancaster Lithium.

As a result of the completion of the Transaction, the former shareholders of Lancaster Lithium acquired 93% of the outstanding common shares of the Company, and, for accounting purposes, are considered to have acquired control of the Company. Accordingly, the Transaction constitutes a reverse acquisition of the Company by Lancaster Lithium and has been accounted for as a reverse acquisition transaction as there was a change of control. As the Company did not qualify as a business prior to the closing of the transaction according to the definition in IFRS 3, Business Combinations, this acquisition did not constitute a business combination; rather, it was treated as an issuance of shares by Lancaster Lithium for the net assets of the Company. Accordingly, no goodwill was recorded with respect to the Transaction. The Transaction was measured at the fair value of the common shares that Lancaster Lithium would have had to issue to the shareholders of the Company, being 3,036,011 common shares with a fair value of $607,202, 2,060,110 warrants with a fair value of $11,146 and 47,209 stock options with a fair value of $7,166, to give the shareholders of the Company the same percentage of equity interest in the combined entity that results from the reverse acquisition had it taken the legal form of Lancaster Lithium acquiring the Company. The fair value of common shares, warrants and stock options issued were estimated based on the Company's financing event, which took place concurrently with the reverse takeover transaction at the price of $0.20 per common share. These consolidated financial statements include the accounts of the Company as at June 9, 2023, and the historical accounts of the business of Lancaster Lithium since its incorporation on July 12, 2019.

Lancaster Resources Inc.

Notes to the Consolidated Financial Statements

Years Ended March 31, 2025 and 2024

(Expressed in Canadian Dollars)

3. Acquisition of Lancaster Lithium Inc. (continued)

The total consideration of the common shares, stock options, and share purchase warrants have been allocated to the fair value of the net assets acquired and liabilities assumed, as follows:

	$
Fair value of 3,036,011 common shares	607,202
Fair value of 2,060,110 share purchase warrants	11,146
Fair value of 47,209 stock options	7,166
Total consideration	625,514
Net assets and liabilities acquired:
Cash	138,255
Marketable securities (Note 5)	13,636
Amounts receivable	65,267
Prepaid expenses	4,288
Accounts payable and accrued liabilities	(123,676)
Convertible debt (Note 8)	(846,660)
Due to related parties	(101,966)
Net liabilities assumed	(850,856)
Excess of consideration paid on acquisition	1,476,370

The fair value of warrants and stock options of the Company was calculated using the Black-Scholes option pricing model with the following assumptions in weighted average: volatility of 163%, expected life of 2 years, no dividends, no forfeitures, and a risk-free rate of 4.5%.

4. Spin-off

On January 29, 2024, the Company entered into a plan of arrangement with its wholly-owned subsidiary, Nelson Lake (the "Plan of Arrangement"). The Plan of Arrangement was approved by the Company's shareholders by special resolutions at a special meeting of the shareholders on March 15, 2024 and was approved by the British Columbia Supreme Court in a final order on March 25, 2024. On April 2, 2024, The Company subscribed for 1,650,000 common shares of Nelson Lake at a price of $0.02 per common share with a payment of $33,000. On the same date, the Company issued 550,000 fully paid and non-assessable shares to Nelson Lake for proceeds of $33,000.

On April 2, 2024, the Company declared a share dividend of 1,046,269 Nelson Lake shares based on $0.01 net assets per share in Nelson Lake for each of the common shares of the Company held as of the record date of February 5, 2024 (the "Spin-Off"). Following the spin-off transaction, the Company holds 703,732 common shares of Nelson Lake, representing approximately 40% of Nelson Lake's total issued and outstanding shares. Nelson Lake continues to meet the criteria for consolidation based on IFRS 10 as it has majority interest in Nelson Lake's Board of Directors and controls the day-to-day operations of Nelson Lake, and the Company continues to present Nelson Lake's financial results on a consolidated basis.

Lancaster Resources Inc.

Notes to the Consolidated Financial Statements

Years Ended March 31, 2025 and 2024

(Expressed in Canadian Dollars)

5. Marketable Securities

As at March 31, 2025, the Company owns the following marketable securities: 240,257 (2024 – 240,257) common shares of Komo Plant Based Foods Inc., 550,000 (2024 – 550,000) of the Company's shares held by its subsidiary Nelson Lake Copper Corp., and 61,500 (2024 – 125,000) stock options of Greenridge Exploration Inc. The fair values and adjustments to the marketable securities are shown below:

	Common shares $	Stock options $	Total $
Fair value, March 31, 2023	25,000	-	25,000
Additions	13,636	78,378	92,014
Unrealized loss	(33,831)	-	(33,831)
Fair value, March 31, 2024	4,805	78,378	83,183
Additions	33,000	-	33,000
Cash paid for the exercise of stock options	-	40,005	40,005
Other	-	119	119
Proceeds from the sale of marketable securities	-	(65,953)	(65,953)
Realized loss from the sale of marketable securities	-	(24,205)	(24,205)
Unrealized loss	(29,553)	(22,642)	(52,195)
Fair value, March 31, 2025	8,252	5,702	13,954

6. Exploration and Evaluation Assets

	Alkali Flat Lithium Project $	Trans Taiga Lithium Project $	Nelson Lake Copper Project $	Other Claims $	Total $
Acquisition costs:
Balance, March 31, 2023	137,030	-	-	-	137,030
Additions	-	30,250	3,447	4,870	38,567
Balance, March 31, 2024	137,030	30,250	3,447	4,870	175,597
Additions	-	-	-	3,352	3,352
Disposition	-	-	-	(565)	(565)
Impairment	(137,030)	(30,249)	-	-	(167,279)
Balance, March 31, 2025	-	1	3,447	7,657	11,105
Exploration costs:
Balance, March 31, 2023	109,100	-	-	-	109,100
Claims maintenance	57,036	-	-	-	57,036
Consulting	25,629	-	-	-	25,629
Geological	18,610	-	27,765	-	46,375
Surveys	27,048	-	-	-	27,048
Balance, March 31, 2024	237,423	-	27,765	-	265,188
Impairment	(237,423)	-	-	-	(237,423)
Balance, March 31, 2025	-	-	27,765	-	27,765
Carrying values:
March 31, 2024	374,453	30,250	31,212	4,870	440,785
March 31, 2025	-	1	31,212	7,657	38,870

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

6. Exploration and Evaluation Assets (continued)

Alkali Flat Lithium Project

On November 17, 2022, the Company entered into an option purchase agreement with Majuba Mining Ltd. ("Majuba"), pursuant to which the Company was granted the exclusive right and option to acquire, subject to the reservation of 1.5% net production royalty, a 100% interest in the Alkali Flat Lithium Project located near Lordsburg in Hidalgo County, New Mexico.

To earn its 100% interest, the Company must pay an aggregate of US$2,975,000 to Majuba as follows:

US$25,000 within 18 business days of acquisition (paid);
US$50,000 within 90 calendar days of acquisition (paid);
US$150,000 on or before the second anniversary of acquisition;
US$1,000,000 on or before the third anniversary of acquisition; and
US$1,750,000 on or before the fourth anniversary of acquisition.

During the year ended March 31, 2025, the Company recorded an impairment loss of $374,453 due to management's decision to terminate the project due to declining market price of lithium.

Trans Taiga Lithium Project

On August 29, 2023, the Company entered into an option purchase agreement for the full acquisition of the Trans Taiga Lithium Project (the "Trans Taiga") situated in the James Bay region of Quebec. The agreement grants the Company an exclusive option to acquire 100% ownership of the Project from a group that includes Bounty Gold Corp. and Last Resort Resources. A total purchase price of $115,000 is payable to as follows:

$37,000 due within 10 days of entering into the long form agreement, paid through $10,000 cash plus $27,000 via the issuance of 135,000 common shares in Lancaster's stock at a deemed price of $0.20 per share;
$26,000 due on the first anniversary date of the option agreement;
$26,000 due on the second anniversary date; and
$26,000 due on the third anniversary date.

The Company may, at its discretion, make 50% of each payment in common stock. The agreement includes a 2% net smelter returns ("NSR") royalty, of which one-half of the NSR (or 1%) can be purchased by the Optionors for $1,000,000. The Company also agreed to make the following additional payments:

A $50,000 fee is payable if exploration results yield a minimum of 10 contiguous meters of lithium with values of 1% or more; and
A payment of $1,000,000 is due if the Company publishes a 43-101 technical report for a resource of not less than 5 million tons with 1% lithium concentration.

During the year ended March 31, 2025, the Company recorded an impairment loss of $30,249 due to the option agreement being in default for non-payment. The Company is actively working on curing the default status of the agreement.

Nelson Lake Copper Project

On December 18, 2023, the Company directly staked 1 mining claim covering a contiguous block of 5,746 hectares in Saskatchewan (the "Nelson Lake Copper Property") for $3,447, which was paid to the Government of Saskatchewan, as administered through the Mineral Administration Registry Saskatchewan (MARS).

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

6. Exploration and Evaluation Assets (continued)

Other claims

The Company owns various mineral property claims pending further development including an Athabasca Basin uranium claim, a Piney Lake gold claim and a Charlot Lake uranium claim with an aggregated cost of $7,657.

On June 14, 2024, the Company disposed of its Robinson Lake gold claim for proceeds of $15,000 and settlement of accounts payable of $14,192 resulting in a gain on disposition of $29,192.

7. Related Party Transactions

During the years ended March 31, 2025 and 2024, compensation of key management personnel were as follows:

	2025	2024
	$	$
Consulting fees	244,838	330,650
Share-based compensation	95,872	154,794
Wages and benefits	-	26,495
	340,710	511,939

As at March 31, 2025, the Company owed $120,273 (2024 – $3,954) to a director of the Company, of which $105,299 (2024 – $nil) is included in accounts payable and $14,973 (2024 – $3,954) in due to related parties. These amounts are unsecured, non-interest-bearing, and due on demand.

As at March 31, 2025, the Company owed $44,376 (2024 -$8,806) to the CEO of the Company, which is included in accounts payable and accrued liabilities. The amounts owed are unsecured, non-interest bearing, and due on demand.

As at March 31, 2025, the Company owed $54,275 (2024 -$nil) to the CFO of the Company, which is included in accounts payable and accrued liabilities. The amounts owed are unsecured, non-interest bearing, and due on demand.

8. Convertible Debentures

The Company assumed the following convertible debentures on acquisition on June 9, 2023:

November 29, 2021 issuance (the "2021 Debentures")

On November 29, 2021, 750 convertible debenture units were issued at a price of $1,000 per unit for gross proceeds of $750,000. Each unit consisted of a repayable note with a face value of $1,000 (the "Debentures") and 66 warrants to purchase common shares of the Company. The Debentures bear interest at a rate of 10% per annum on an accrual basis from issuance, calculated and payable semi-annually in arrears on May 31 and November 30 of each year. The Company issued an aggregate of 50,000 warrants to the debenture holders.

The Debentures have a redemption date that is 24 months from the date of issuance and are convertible in full or in part, at the holders' option, into common shares of the Company at a price of $14.40 per common share, at any time prior to their redemption. Each warrant entitles the holder thereof to acquire one common share of the Company at a price of $16.80 per share for a period of 36 months from the date of issue.

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

8. Convertible Debentures (continued)

November 29, 2021 issuance (the “2021 Debentures”) (continued)

In connection with the issuance of the 2021 Debentures, 5,208 agent’s options (the “Agent’s Options”) were granted with a fair value of $61,993, entitling the holder to purchase a unit of the Company (the “Agent’s Option Unit”) at $14.40 per Agent’s Option until November 29, 2023. Each Agent’s Option Unit consists of one common share of the Company (each, an “Agent’s Option Share”) and one share purchase warrant (each, an “Agent’s Option Warrant”). Each Agent’s Option Warrant further entitles the holder to purchase one additional common share of the Company at a price of $16.80 for a period of 36 months from the Agent’s Options issue date of November 29, 2021. The estimated fair value associated with the Agent’s Options granted was determined using the Black-Scholes Pricing model with the following assumptions: stock price at grant date of $16.92; annualized volatility of 132%; expected life of 2 years; dividend yield of 0%; expected forfeiture rate of 0%; and risk-free rate of 1.08%.

April 8, 2022 issuance (the “2022 Debentures”)

On April 8, 2022, 285 convertible debenture units were issued at a price of $1,000 per unit for gross proceeds of $285,000, and 109 convertible debenture units at a price of $1,000 per unit to settle accounts payable of $109,000. Each unit consisted of a repayable note with a face value of $1,000 (the “Debentures”) and 79 warrants to purchase common shares of the Company. The Debentures bear interest at a rate of 10% per annum on an accrual basis from issuance, calculated and payable semi-annually in arrears on May 31 and November 30 of each year. The Company issued an aggregate of 31,192 warrants to the debenture holders. The Debentures have a redemption date that is 24 months from the date of issuance and are convertible in full or in part, at the holders’ option, into common shares of the Company at a price of $9.00 per common share, at any time prior to their redemption. Each warrant entitles the holder thereof to acquire one common share of the Company at a price of $9.60 per share for a period of 36 months from the date of issue.

In connection with the issuance of the Debentures, 1,108 agent’s options (the “Agent’s Options”) were granted with a fair value of $3,809, entitling the holder to purchase a unit of the Company (the “Agent’s Option Unit”) at $9.00 per Agent’s Option until April 8, 2024. Each Agent’s Option Unit consists of one common share of the Company (each, an “Agent’s Option Share”) and one share purchase warrant (each, an “Agent’s Option Warrant”). Each Agent’s Option Warrant further entitles the holder to purchase one additional common share of the Company at a price of $9.60 for a period of 36 months from the Agent’s Options issue date of April 8, 2022. The estimated fair value associated with the Agent’s Options granted was determined using the Black-Scholes Pricing model with the following assumptions: stock price at grant date of $6.00; annualized volatility of 129%; expected life of 2 years; dividend yield of 0%; expected forfeiture rate of 0%; and risk-free rate of 2.42%.

Extension of maturity:

During the year ended March 31, 2024, the Company reached agreements with the registered holders of the 2021 Debentures and the 2022 Debentures. The maturity date of the remaining principal balance of the 2021 Debentures and 2022 Debentures in the total amount of $994,400 was extended to December 2, 2024. All other terms of the convertible debentures remain unchanged.

The modification of terms of its debentures did not trigger an extinguishment of debt. The Company applied modification accounting and accounted for the modifications as an adjustment to the existing liabilities

As at March 31, 2025, the carrying value of the principal amount outstanding was $994,400 (2024 - $937,711) and accrued interest payable was $199,046 (2024 - $99,439).

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

8. Convertible debentures (continued)

Accretion and accrued interest

During the years ended March 31, 2025 and 2024, accretion and accrued interest for the debentures are as follows:

	November 29, 2021 issuance $	April 8, 2022 issuance $	Total $
Carrying amount at March 31, 2023	-	-	-
Addition through RTO at June 9, 2023 (Note 3)	628,368	218,292	846,660
Accretion	89,144	20,965	110,109
Accrued interest	60,221	20,160	80,381
Carrying amount at March 31, 2024	777,733	259,417	1,037,150
Accretion	41,768	14,921	56,689
Accrued interest	74,625	24,982	99,607
Carrying amount at March 31, 2025	894,126	299,320	1,193,446

9. Share Capital

Authorized: unlimited number of common shares without par value.

Year ended March 31, 2025

On March 28, 2025, the Company issued 2,249,000 units of the Company at a price of $0.05 per unit, of which 560,000 units were issued for proceeds of $28,000 and 1,689,000 units were issued for the conversion of an accounts payable amount of $84,450. Each unit consisted of one common share of the Company and one share purchase warrant, where in each share purchase warrant entitles the holder to acquire one additional common share of the Company for $0.05 per share expiring on March 28, 2028. Proceeds from subscription of $28,000 was received subsequent to year end, see Note 18.

On April 10, 2024, the Company issued 1,000,000 units of the Company at a price of $0.05 per unit, of which 600,000 units were issued for proceeds of $30,000, which was received in the prior year, and 400,000 units were issued for conversion of debt of $20,000, which include $2,560 owed to a director of the Company. Each unit consisted of one common share and one share purchase warrant where in each share purchase warrant entitles the holder to acquire one additional common share of the Company at $0.08 per share until April 10, 2027.

On April 2, 2024, the Company the Plan of Arrangement and issued 550,000 non-assessable common shares to Nelson Lake with fair value of $24,750.

During the year ended March 31, 2025, the Company issued 3,290,000 common shares of the Company pursuant to the conversion of RSUs, of which 2,200,000 were issued to officers and directors of the Company. The fair value of the RSUs of $92,750 was reclassified from share-based equity reserve to share capital.

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

9. Share Capital (continued)

Year ended March 31, 2024

On February 2, 2024, the Company issued 2,125,000 units at a price of $0.05 per unit for proceeds of $106,250. Each unit consisted of one common share and one share purchase warrant. Each warrant entitles the holder thereof to acquire one common share at an exercise price of $0.08 per share expiring on February 2, 2027. In connection with the private placement, the Company paid finder's fees of $2,000 and issued 40,000 finder's warrants with fair value of $2,177, where each finder's warrant is exercisable at $0.08 per share expiring on February 2, 2027. The fair value of the finder's warrants was determined using the Black-Scholes option pricing model with the following assumptions: volatility of 300%; expected life of 3 years; no expected dividends; and a risk-free rate of 3.84%.

On November 28, 2023, the Company issued 4,641,000 units at a price of $0.05 per unit for proceeds of $232,050. Each unit consisted of one common share and one share purchase warrant. Each warrant entitles the holder thereof to acquire one common share at an exercise price of $0.07 per share until November 28, 2028. In connection with the private placement, the Company paid finder's fees of $5,120 and issued 102,400 finder's warrants with fair value of $5,116, where each finder's warrant is exercisable at $0.07 per share expiring on November 28, 2028. The fair value of the finder's warrants was determined using the Black-Scholes option pricing model with the following assumptions: volatility of 300%; expected life of 3 years; no expected dividends; and a risk-free rate of 3.67%.

On November 28, 2023, the Company issued 2,500,000 flow-through common shares at a price of $0.08 per share for proceeds of $200,000. In connection with the private placement, the Company paid $18,000 of finder's fees and issued 240,000 finder's warrants with fair value of $11,990, where each finder's warrant is exercisable at $0.07 per share expiring on November 28, 2028. As part of the issuance, the Company recorded a flow-through share premium liability of $75,000 with a corresponding reduction to share capital. The fair value of the finder's warrants was determined using the Black-Scholes option pricing model with the following assumptions: volatility of 300%; expected life of 3 years; no expected dividends; and a risk-free rate of 3.67%.

On August 31, 2023, the Company issued 135,000 common shares with a fair value of $20,250 to acquire option rights to the Tran Taiga Lithium project (Note 6).

On June 27, 2023, the Company issued 100,000 common shares for the exercise of stock options at an exercise price of $0.15 per share for total proceeds of $15,000. The fair value of stock options of $13,679 was reclassified from share-based reserve to share capital.

On June 16, 2023, the Company issued 300,000 common shares for the exercise of broker warrants at an exercise price of $0.15 per common share for total proceeds of $45,000. The fair value of broker warrants of $66,688 were reclassified from share-based reserve to share capital.

On June 9, 2023, the Company issued 3,036,011 common shares in an RTO transaction (Note 3).

On April 3, 2023, the Company completed a non-brokered private placement offering of 680,000 share units at a price of $0.20 per unit. Each unit consisted of one common share and one non-transferable common share purchase warrant, with each warrant entitling the holder to acquire an additional common share at an exercise price of $0.40 per share expiring on April 3, 2026. Share subscriptions of $70,000 received during a previous period were applied to this offering.

Lancaster Resources Inc.

Notes to the Consolidated Financial Statements

Years Ended March 31, 2025 and 2024

(Expressed in Canadian Dollars)

10. Share Purchase Warrants

The following table summarizes the continuity of the Company's share purchase warrants:

	Number of warrants	Weight average exercise price $
Balance, March 31, 2023	17,055,593	0.39
Issued	9,888,510	0.29
Exercised	(300,000)	0.15
Balance, March 31, 2024	26,644,103	0.35
Issued	3,249,000	0.06
Expired	(5,112)	0.03
Balance, March 31, 2025	29,841,991	0.29

As at March 31, 2025, the following share purchase warrants were outstanding:

Number of warrants outstanding	Exercise price $	Expiry date
31,197	9.60	April 8, 2025
5,209	16.80	March 31, 2026
6,000,000	0.30	March 31, 2026
122,000	0.20	March 31, 2026
1,975,000	0.40	March 31, 2026
897,668	0.18	March 31, 2026
300,000	0.15	March 31, 2026
7,460,925	0.50	March 31, 2026
680,000	0.40	April 3, 2026
1,972,592	0.40	June 9, 2026
2,165,000	0.08	February 2, 2027
1,000,000	0.08	April 10, 2027
4,983,400	0.07	November 28, 2027
2,249,000	0.05	March 31, 2028
29,841,991

Lancaster Resources Inc.

Notes to the Consolidated Financial Statements

Years Ended March 31, 2025 and 2024

(Expressed in Canadian Dollars)

11. Stock Options

On October 16, 2021, the Company adopted an incentive stock option plan. Pursuant to the Company's stock option plan, directors may, from time to time, authorize the issuance of options to directors, officers, employees, and consultants of the Company. The terms of the granted stock options as well as the vesting conditions, are at the sole discretion of the directors.

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

	Number of options	Weighted average exercise price $
Outstanding, March 31, 2023	3,306,000	0.18
Granted	5,380,000	0.15
Exercised	(100,000)	0.15
Cancelled/expired	(436,000)	0.20
Outstanding, March 31, 2024	8,150,000	0.16
Granted	900,000	0.10
Cancelled/expired	(1,840,000)	0.17
Outstanding, March 31, 2025	7,210,000	0.15
Exercisable, March 31, 2025	6,725,000	0.15

Additional Information regarding stock options outstanding and exercisable as at March 31, 2025 is as follows:

Range of exercise prices $	Outstanding			Exercisable
	Number of stock options	Weighted average remaining contractual life (years)	Weighted average exercise price $	Number of stock options	Weighted average exercise price $
$0.10	2,000,000	4.02	0.03	1,840,000	0.02
$0.12	1,700,000	3.49	0.03	1,375,000	0.03
$0.15	660,000	1.57	0.01	660,000	0.01
$0.20	2,250,000	3.08	0.06	2,250,000	0.07
$0.23	600,000	3.24	0.02	600,000	0.02
	7,210,000	3.30	0.15	6,725,000	0.15

During the year ended March 31, 2025, the Company recorded share-based compensation expense from stock options of $38,598 (2024 - $670,634) of which $31,372 (2024 - $154,794) pertains to directors and officers of the Company. Share-based compensation expense related to stock options was determined using the Black-Scholes option pricing model. Weighted average assumptions used in calculating the fair value of share-based compensation expense, including no expected dividends or forfeitures, are as follows:

	2025	2024
Risk-free interest rate	3.50%	3.66%
Expected volatility	391%	216%
Expected life (years)	5.00	4.70

As at March 31, 2025, the weighted average fair value of stock options granted was $0.07 (2024 - $0.13) per option. During the year ended March 31, 2025, the weighted average share price of the exercise of stock options was $nil (2024 - $0.23) per share.

Lancaster Resources Inc.

Notes to the Consolidated Financial Statements

Years Ended March 31, 2025 and 2024

(Expressed in Canadian Dollars)

12. Restricted Share Units

On May 8, 2024, the Company adopted a restricted share unit ("RSU") plan. Pursuant to the Company's restricted share unit plan, directors may, from time to time, authorize the issuance of restricted share units to directors, officers, employees, and consultants of the Company. The terms of the granted restricted share units as well as the vesting conditions are at the sole discretion of the directors. Below are number of RSU's outstanding as at March 31, 2025:

	Number of RSUs
Balance, March 31, 2023 and 2024	-
Issued	3,290,000
Converted	(3,290,000)
Balance, March 31, 2025	-

Share-based compensation expense relating to restricted share units was determined using the fair value of common shares of the Company on the date of grant, which was determined using the market price of the Company's common shares.

During the year ended March 31, 2025, the Company recognized share-based compensation expense relating to RSUs of $92,750 (2024 - $nil) in equity reserves, of which $64,500 (2024 - $nil) pertains to directors and officers of the Company.

The weighted average fair value of RSUs granted during period ended March 31, 2025 was $0.02 (2024 - $nil) per RSU.

13. Supplemental Cash Flow Disclosures

	Year ended March 31,
	2025	2024
	$	$
Cash and cash equivalents is comprised of:
Cash in bank	27	44,578
Cash held in legal trust	-	7,641
Total cash and cash equivalents	27	52,219
Non-cash investing and financing activities
Fair value of brokers' warrants issued as finders' fees	-	19,283
Fair value of equity instruments issued for acquisitions	-	625,514
Fair value of modification of broker warrants	-	117,860
Fair value of RSUs transferred from reserves to share capital	92,750	-
Fair value of shares issued through plan of arrangement	24,750	-
Fair value of stock options exercised transferred from reserves to share capital	-	13,679
Fair value of warrants exercised transferred from reserves to share capital	-	66,688
Flow through share premium liability deducted from flow-through proceeds	-	75,000
Shares issuable for the settlement of accounts payable	54,000	-
Shares issued to acquire exploration and evaluation assets	-	20,250
Shares issued to settle accounts payable	45,335	27,250

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

14. Capital Management

The Company manages its capital structure and makes adjustments, based on the funds available to the Company, to support the general operations of the Company and facilitate the liquidity needs of its operations. 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 to include its working capital position and share capital. 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 is not subject to externally imposed capital requirements.

15. Financial Instruments and Risk Management

Fair Values

Assets and liabilities measured at fair value on a recurring basis were presented on the consolidated statement of financial position as at March 31, 2025 and 2024, as follows:

	Fair Value Measurements Using			Balance, March 31, 2025
	Quoted prices in active markets for identical instruments (Level 1) $	Significant other observable inputs (Level 2) $	Significant unobservable inputs (Level 3) $
Marketable securities	8,252	-	5,702	13,954
	Fair Value Measurements Using			Balance, March 31, 2024
	Quoted prices in active markets for identical instruments (Level 1) $	Significant other observable inputs (Level 2) $	Significant unobservable inputs (Level 3) $
Marketable securities	4,805	-	78,378	83,183

The fair values of other financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, amounts due to related parties, and convertible debentures approximate their carrying values due to the relatively short-term maturity of these instruments.

Credit Risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counter-party default on its obligation. The Company's credit risk is primarily attributable to cash and cash equivalents. The Company minimizes its credit risk associated with its cash and cash equivalents balance by dealing with major financial institutions in Canada and has no other significant concentration of credit risk arising from operations. The carrying amount of financial assets represents the maximum credit exposure.

Foreign Exchange Rate and Interest Rate Risk

The Company is not exposed to any significant foreign exchange rate or interest rate risk.

Lancaster Resources Inc.

Notes to the Consolidated Financial Statements

Years Ended March 31, 2025 and 2024

(Expressed in Canadian Dollars)

15. Financial Instruments and Risk Management (continued)

Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting financial obligations due to a shortage of funds. All of the Company's obligations are due within one year. The Company manages liquidity risk by maintaining sufficient cash balances and adjusting its operating budget and expenditure. Liquidity requirements are managed based on expected cash flows to ensure that there are sufficient funds to meet short-term and specific obligations.

Price Risk

The Company is exposed to price risk with respect to commodity prices and publicly traded market prices for marketable securities. The Company's ability to raise capital to fund exploration and development activities is subject to risks associated with fluctuations in the market price of commodities.

16. Non-controlling Interest

On April 2, 2024, the Company declared a dividend of 1,046,269 Nelson Lake shares ("Dividend Shares") on a basis of 0.02 common shares of Nelson Lake for each common share of the Company. The Dividend Shares represented 59.8% of the total issued and outstanding shares of Nelson Lake. However, the Company has control over Nelson Lake's board of directors and management. Based on IFRS 10, the Company presented Nelson Lake's financial information through consolidation non-controlling interest in the amount of $10,462 was recognized on April 2, 2024.

The following table presents the summary of financial information of Nelson Lake. This information represents amounts before intercompany eliminations.

Summarized statement of financial position:

	March 31, 2025	March 31, 2024
	$	$
Current assets	12,119	2,531
Current liabilities	58,174	57,105
Current net liabilities	(46,055)	(54,574)
Non-current assets	32,639	31,212
Net liabilities	(13,416)	(23,362)
Accumulated non-controlling interests
Recognized during the period	10,462	-
Allocation of net loss during the period	(10,462)	-
	-	-

Summarized statement of comprehensive loss for the years ended March 31, 2025 and 2024:

	Year ended March 31, 2025	Year ended March 31, 2024
	$	$
Net loss	(23,054)	-
Net loss allocated to non-controlling interests	(13,784)	-

Lancaster Resources Inc.

Notes to the Consolidated Financial Statements

Years Ended March 31, 2025 and 2024

(Expressed in Canadian Dollars)

16. Non-controlling Interest (continued)

Summarized statement of cash flows for the years ended March 31,

	Year ended March 31, 2025 $	Year ended March 31, 2024 $
Cash flows from operating activities	(13,009)	-
Cash flows from financing activities	13,009
Net change in cash	-	-

17. Income Taxes

The Company is subject to Canadian federal and provincial tax at the rate of 27%. The tax effect of the significant temporary differences, which comprise deferred income tax assets and liabilities, are as follows:

	2025	2024
	$	$
Net loss	(1,548,884)	(3,608,456)
Canadian statutory income tax rate	27%	27%
Income tax recovery at statutory rate	(418,199)	(974,283)
Tax effect of:
Permanent differences and other	87,666	599,350
True up of prior year differences	-	(124,289)
Change in statutory rate	-	(407,709)
Change in unrecognized deferred income tax assets	330,534	906,931
Income tax provision	-	-

The significant components of deferred income tax assets and liabilities are as follows:

	2025	2024
	$	$
Deferred income tax assets
Non-capital losses carried forward	1,193,943	952,077
Marketable securities	35,634	48,701
Exploration and evaluation assets	109,269	-
Intangible assets	43,065	43,065
Share issuance costs	11,565	19,099
Total gross deferred income tax assets	1,393,476	1,062,942
Unrecognized deferred income tax assets	(1,393,476)	(1,062,942)
Net deferred income tax assets	-	-

As of March 31, 2025, the Company has Canadian non-capital losses carried forward of $4,422,011, which are available to offset future years' taxable income. These losses expire as follows:

	$
2040	1,120
2041	19,424
2042	679,307
2043	1,471,915
2044	1,354,444
2045	895,801
	4,422,011

The Company also has available mineral resource related expenditure pools totaling $443,571, which may be deducted against future taxable income on a discretionary basis.

Lancaster Resources Inc.
Notes to the Consolidated Financial Statements
Years Ended March 31, 2025 and 2024
(Expressed in Canadian Dollars)

18. Subsequent Events

(a) On April 22, 2025, the Company reached an agreement to purchase 100% interest in the Lake Cargelligo Project located in New South Wales, Australia, (the "Property") for a total purchase price of $210,000 plus GST, payable in 10,000,000 shares of the Company at a deemed value of $0.02 per share and $10,000 cash and a net smelter royalty of 2% (the "Purchase Price").

In addition to the Purchase Price, the Company shall make the following payments following the closing:

1) upon completion of the first geophysics campaign post-closing, $30,000 plus GST;
2) upon commencement of the first drilling campaign at the Property post-closing, $50,000 plus GST;
3) upon the Company undertaking a capital raise of $1,000,000 or more post-closing, $50,000 plus GST;
4) upon the Company receiving conditional approval to list its shares on the Australian Security Exchange, $50,000 plus GST;
5) upon the completion of an NI 43-101 compliant resource estimate, or JORC equivalent, of greater than 1,000,000 ounces of gold $500,000 plus GST;
6) upon completion of a NI 43-101 compliant preliminary economic assessment (PEA), or JORC equivalent, prepared to a commercially reasonable standard and based on a mineral resource estimate of not less than 1,000,000 ounces of gold, $1,000,000 plus GST;
7) upon completion of a NI 43-101 compliant prefeasibility study (PFS), or JORC equivalent, prepared to a commercially reasonable standard and based on a mineral resource estimate of not less than 1,000,000 ounces of gold, $2,000,000 plus GST; and

at the election of the Seller, up to 10% by value of each Contingent Payment plus GST, may be made in the form of cash, and at the election of the Purchaser, some or all of the remaining 90% by value of each Contingent Payment listed or 100% by value of each Contingent Payment listed if the Seller so elects, may be made in the form of the issuance of Shares, at a deemed price per Share which does not exceed the applicable volume weighted average price.

(b) On April 25, 2025, the Company granted 1,600,000 RSU's to its directors and officers, which vested immediately after grant.

(c) On May 30, 2025, the Company issued 20,000,000 units of the Company at $0.02 per unit for gross proceeds of $400,000. Each unit consists of one common share of the Company and on share purchase warrant. Each warrant entitle the holder to acquire one common share in the capital of the Company at $0.05 until the date that is three years from the date of issuance.

(d) In June 2025, the Company issued 438,000 shares for proceeds of $30,660 pursuant to the exercise of share purchase warrants.

AI assistant

Lancaster Resources Inc. — Audit Report / Information 2025

47911_rns_2025-07-30_7c904c2f-454c-4657-93da-7185f7fb7c05.pdf

LANCASTER RESOURCES INC.

INDEPENDENT AUDITOR'S REPORT

Opinion

Basis for Opinion

Material Uncertainty Related to Going Concern

Key Audit Matters

Other Information

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

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

1. Nature of Operations and Continuance of Business

2. Material Accounting Policy Information

Statement of Compliance

Basis of Presentation

2. Material Accounting Policy Information (continued)

Significant Accounting Estimates and Judgments

Cash and Cash Equivalents

Loss Per Share

2. Material Accounting Policy Information (continued)

Business Combinations

Financial Instruments

Financial Assets

Financial assets at FVTPL

2. Material Accounting Policy Information (continued)

Financial Instruments (continued)

Financial assets at amortized cost

Financial assets at FVOCI

Impairment of financial assets

Financial Liabilities

2. Material Accounting Policy Information (continued)

Financial Instruments (continued)

Equity instruments

Impairment of non-financial assets

Exploration and Evaluation Expenditures

Impairment of exploration and evaluation assets

2. Material Accounting Policy Information (continued)

Exploration and Evaluation Expenditures (continued)

Reclamation and remediation provisions

Share-based Payments

2. Material Accounting Policy Information (continued)

Income Taxes

Recent Accounting Pronouncements

IFRS 18 Presentation and Disclosure in Financial Statements

Classification of liabilities as current or non-current (amendments to IAS 1, presentation of financial statements)

2. Material Accounting Policy Information (continued)

Recent Accounting Pronouncements (continued)

3. Acquisition of Lancaster Lithium

3. Acquisition of Lancaster Lithium Inc. (continued)

4. Spin-off

5. Marketable Securities

6. Exploration and Evaluation Assets

6. Exploration and Evaluation Assets (continued)

Alkali Flat Lithium Project

Trans Taiga Lithium Project

Nelson Lake Copper Project

6. Exploration and Evaluation Assets (continued)

Other claims

7. Related Party Transactions

8. Convertible Debentures

8. Convertible Debentures (continued)

April 8, 2022 issuance (the “2022 Debentures”)

Extension of maturity:

8. Convertible debentures (continued)

Accretion and accrued interest

9. Share Capital

Year ended March 31, 2025

9. Share Capital (continued)

Year ended March 31, 2024

10. Share Purchase Warrants

11. Stock Options

12. Restricted Share Units

13. Supplemental Cash Flow Disclosures

14. Capital Management

15. Financial Instruments and Risk Management

Fair Values

Credit Risk

Foreign Exchange Rate and Interest Rate Risk

15. Financial Instruments and Risk Management (continued)

Lancaster Resources Inc. Audit Report / Information 2025