StrategX Elements Corp. — Audit Report / Information 2022

Apr 24, 2023

STRATEGX ELEMENTS CORP.

CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended

December 31, 2022 and 2021

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Crowe MacKay LLP

1100 - 1177 West Hastings Street Vancouver, BC V6E 4T5 Main +1 (604) 687-4511 Fax +1 (604) 687-5805 www.crowemackay.ca

Independent Auditor's Report

To the Shareholders of StrategX Elements Corp.

Opinion

We have audited the consolidated financial statements of StrategX Elements Corp. (the "Group"), which comprise the consolidated statements of financial position as at December 31, 2022 and December 31, 2021 and the consolidated statements of loss and comprehensive loss, changes in shareholders' equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2022 and December 31, 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards.

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 Consolidated Financial Statements section of our report. We are independent of the Group 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 2 to the consolidated financial statements which describes the material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the year ended December 31, 2022. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be a key audit matter to be communicated in our report. 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.

Recoverability of Exploration and Evaluation Assets

As disclosed in Note 6 to the consolidated financial statements, the carrying value of Exploration and Evaluation Assets represents a significant asset of the Group. Refer to Note 3 to the consolidated financial statements for a description of the accounting policy and significant judgments applied to Exploration and Evaluation Assets.

At each reporting period end, management applies judgment in assessing whether there are any indicators of impairment relating to mining claims and deferred exploration costs. If there are indicators of impairment, the recoverable amount of the related asset is estimated in order to determine the extent of any impairment. Indicators of impairment may include (i) the period during which the entity has the right to explore in the specific area has expired during the year or will expire in the near future and is not expected to be renewed; (ii) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned; (iii) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and (iv) sufficient data exists to indicate that the carrying amount of the mining claims and deferred exploration costs is unlikely to be recovered in full from successful development or by sale.

Why the matter was determined to be a key audit matter

We considered this a key audit matter due to (i) the significance of the mining claims and deferred exploration costs balance and (ii) the judgments made by management in its assessment of indicators of impairment related to mining claims and deferred exploration costs, which have resulted in a high degree of subjectivity in performing audit procedures related to these judgments applied by management.

How the matter was addressed in our audit

We have evaluated management’s assessment of impairment indicators per IFRS 6 Exploration for and Evaluation of Mineral Resources, including but not limited to:

• Reviewing the Group’s rights to explore in the relevant exploration areas and assessing whether the rights to tenure remained current at balance date;

• Considering the status of the relevant exploration areas by holding discussions with management, and reviewing the Group’s exploration budget and directors’ minutes;

• Assessing whether any data exists to suggest that the carrying value of the Exploration and Evaluation assets is unlikely to be recovered through development or sale; and

• Assessing the adequacy of the related disclosures in Note 3 and Note 6 to the consolidated financial statements.

Other Information

Management is responsible for the other information. The other information comprises:

• Management's Discussion and Analysis

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

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above 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.

We obtained the other information prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. 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 International Financial Reporting Standards, 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 Group’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 Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’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 Group’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 Group’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 Group 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 of 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.

The engagement partner on the audit resulting in this independent auditor's report is Diana Huang.

"Crowe MacKay LLP"

Chartered Professional Accountants Vancouver, Canada April 24, 2023

STRATEGX ELEMENTS CORP.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian dollars) AS AT December 31,

		Notes	2022	2021
	ASSETS Current Cash Receivables Prepaid expenses Total current assets Due from related party Equipment Long-term deposits Exploration and evaluation assets Total assets	9 5 4 5, 6	$ 539,021 126,082 70,473 735,576 134,789 26,284 79,032 3,623,771 $ 4,599,452	$ 831,038 13,567 3,154 847,759 126,393 - 67,532 1,397,558 $ 2,439,242
	LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities Due to related parties Loans Deferred government grant Total current liabilities Flow-through share premium liability Total liabilities Shareholders' equity Share capital Contributed surplus Warrant reserve Accumulated deficit Total shareholders’ equity Total liabilities and shareholders’ equity	9 7 6 12 8 8 8	$ 1,768,355 56,421 40,000 102,000 1,966,776 64,161 2,030,937 4,719,738 434,917 121,180 (2,707,320) 2,568,515 $ 4,599,452	$ 272,944 59,014 40,000 - 371,958 - 371,958 2,700,053 - 120,519 (753,288) 2,067,284 $ 2,439,242
	Nature of operations(Note 1) Going concern(Note 2) On behalf of the Board: “Darren Bahrey” Director	“Ryan McEachern”	Director

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

STRATEGX ELEMENTS CORP.

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(Expressed in Canadian dollars)

FOR THE YEARS ENDED December 31,

Notes	2022 2021
EXPENSES Accretion and interest 7 Accounting and auditing Consulting Corporate and shareholder communication Filing and transfer agent Foreign exchange (gain) loss Insurance Legal Management fee 9 Non-capitalized exploration expenses Office and miscellaneous Rent Project investigation Salary and benefits Share-based compensation 8, 9 Travel Loss before other item Other items Government grant – CEBA loan 7 Flow-through recovery 12 Loss and comprehensive loss for theyear	$ - $ 5,517 28,121 64,669 53,361 - 268,198 18,741 17,271 35,639 (8,331) 157 20,454 5,250 20,871 97,606 141,000 133,500 803,901 - 46,475 22,203 39,255 26,203 30,646 - 51,598 36,009 434,917 120,519 28,282 -
	(1,976,019) (566,013) - (12,727) 21,987 -
	$ (1,954,032)$ (578,740)
Basic and diluted lossper common share	$ (0.07) $ (0.03)
Weighted average number of common shares outstanding - Basic and diluted	26,861,889 20,745,562

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

STRATEGX ELEMENTS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian dollars)

FOR THE YEARS ENDED December 31,

	2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the year Items not involving cash: Accretion and interest Government grant – CEBA loan Foreign exchange (gain) loss Share-based compensation Flow-through recovery Changes in non-cash working capital items: Receivables Accounts payable and accrued liabilities Prepaid expenses Due to related parties Deferred government grant Net cash used in operating activities CASH FLOWS FROM FINANCING ACTIVITIES Shares issued for cash Share issuance costs Repayment of loan Net cash provided by financing activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of capital assets Long-term deposits Government grants Exploration and evaluation expenditures Net cash used in investing activities Change in cash during the year Effect of foreign exchange Cash, beginning of year Cash, end of year	$ (1,954,032) $ (578,740) - 2,480 - 12,727 (8,331) 157 434,917 120,519 (21,987) - (112,515) (13,567) 748,347 189,600 4,181 1,607 15,159 23,752 102,000 -
	(792,261) (241,465)
	2,208,565 1,585,540 (54,620) (72,522) - (50,000)
	2,153,945 1,463,018
	(35,045) - (11,500) (5,252) 7,805 51,000 (1,614,896) (531,767)
	(1,653,636) (486,019)
	(291,952) 735,534 (65) 187 831,038 95,317
	$ 539,021 $ 831,038

Supplemental disclosures with respect to cash flows (Note 13)

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

STRATEGX ELEMENTS CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Expressed in Canadian dollars)

	Share Capital Special Warrants Number Amount Number Amount Warrant reserve Contributed surplus Accumulated deficit Total
Balance, December 31, 2020 Private placement Special warrants Share issuance costs Conversion of special warrants Exercise of warrants Share-based compensation Net loss for the year Balance, December 31, 2021 Private placement Share issuance costs Flow-through share premium Share-based compensation Net loss for the year Balance, December 31, 2022	15,304,667 $ 1,187,035 - $ - $ - $ - $ (174,548) $ 1,012,487 6,896,096 1,042,415 - - - - - 1,042,415 - - 1,852,500 463,125 - - - 463,125 - (72,522) - - - - - (72,522) 1,852,500 463,125 (1,852,500) (463,125) - - - - 800,000 80,000 - - - - - 80,000 - - - - 120,519 - - 120,519 - - - - - - (578,740) (578,740)
	24,853,263 2,700,053 - - 120,519 - (753,288) 2,067,284 7,799,416 2,207,904 - - 661 - - 2,208,565 - (102,072) - - - - - (102,072) - (86,147) - - - - - (86,147) - - - - - 434,917 - 434,917 - - - - - - (1,954,032) (1,954,032)
	32,652,679 $ 4,719,738 - $ - $ 121,180 $ 434,917 $ (2,707,320) $ 2,568,515

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

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

1. NATURE OF OPERATIONS

StrategX Elements Corp. (“StrategX” or the “Company”) was incorporated on June 28, 2018 under the laws of British Columbia, Canada. On January 10, 2022, the Company’s common shares commenced trading on the Canadian Securities Exchange (“CSE”) under the symbol “STGX”.

The Company’s principal business activity is the acquisition and exploration of mineral property interests. The Company is in the exploration stage and substantially all the Company’s efforts are devoted to financing and developing these property interests. There has been no determination whether the Company’s interests in unproven exploration and evaluation assets contain economically recoverable mineral resources.

The Company’s head office is located at 514 – 55 Water Street, Vancouver, British Columbia, Canada.

2. BASIS OF PRESENTATION

Statement of compliance

These consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and International Financing Reporting Interpretations Committee (“IFRIC”).

These financial statements were approved and authorized for issue by the Board of Directors on April 24, 2023.

Basis of presentation

These consolidated financial statements have been prepared on a historical cost basis, except for financial instruments measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

Basis of consolidation

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, StrategX Diamonds Corp, from its incorporation on April 15, 2019 in the province of British Columbia to its dissolution on July 30, 2021. StrategX Diamonds Corp. is inactive and has no activities since incorporation.

The Company consolidates these subsidiaries on the basis that it controls these subsidiaries. Control is defined as the exposure, or rights, to variable returns from involvement with an investee and the ability to affect those returns through power over the investee. All intercompany transactions and balances have been eliminated on consolidation.

Functional and presentation currency

The Company and its wholly owned subsidiary’s reporting and functional currency is the Canadian dollar. Monetary assets and liabilities of the Company are translated into Canadian dollars at the exchange rate in effect on the consolidated statements of financial position date, while non-monetary assets and liabilities are translated at historical rates. Expenses are translated at the average rates over the reporting period. Gains and losses from these translations are included in profit or loss.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

2. BASIS OF PRESENTATION (cont’d…)

Going concern

The business of mining and exploring for minerals involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable mining operations. The recoverability of the carrying value of its resource properties and the Company's continued existence is dependent upon the preservation of its interest in the underlying properties, the discovery of economically recoverable reserves, the achievement of profitable operations, or the ability of the Company to raise alternative financing, if necessary, or alternatively, upon the Company's ability to dispose of its interests on an advantageous basis. Changes in future conditions could require material write-downs of the carrying values. Such adjustments could be material.

These consolidated financial statements have been prepared in accordance with IFRS on a going concern basis, which contemplates that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. Accordingly, these consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. As at December 31, 2022, the Company has an accumulated deficit of $2,707,320 (2021 - $753,288) and has a working capital deficiency of $1,231,200 (2021 – working capital of $475,801) and has incurred significant losses. These circumstances may cast significant doubt as to the ability of the Company to meet its obligations as they come due, and accordingly, the appropriateness of the use of accounting principles applicable to a going concern. The recovery of amounts capitalized for exploration and evaluation assets at December 31, 2022 and 2021 in the consolidated statements of financial position is dependent upon the ability of the Company to arrange appropriate financing to complete the development and continued exploration of the properties. The Company plans to raise funds primarily through the issuance of shares or obtain profitable operations. The outcome of these matters cannot be predicted at this time.

3. SIGNIFICANT ACCOUNTING POLICIES

Cash

Cash includes cash held at major financial institutions and highly liquid guaranteed investment certificates that are readily available to the Company on demand or with maturity dates of three months or less.

Exploration and evaluation assets (“E&E” assets)

Pre-exploration costs are expensed in the period in which they are incurred. Once the legal right to explore a property has been acquired, the Company capitalizes costs related to the acquisition and exploration of E&E assets. These costs include purchase cost, mineral lease, staking costs, filing fees, drilling, assaying, geological, geophysical, technical studies and any other exploratory activities. E&E assets for which commercially viable reserves have been identified are reclassified to development assets. They are tested for impairment immediately prior to reclassification out of E&E assets. When an unproven mineral interest is abandoned, all related expenditures are written off to operations for the period.

Impairment of non-current assets

Exploration and evaluation assets are assessed for impairment when events or circumstances indicate that the carrying amounts of the assets may not be recoverable. An impairment loss is recognized for any amount by which the asset’s carrying value exceeds its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and its 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. Value in use is determined as the present value of the estimated future pre-tax cash flows expected to arise from the continued use of the asset in its present form and from its ultimate disposal. The Company reviews impairment on non-financial assets for possible reversal when events or circumstances warrant such consideration.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

3. SIGNIFICANT ACCOUNTING POLICIES ( cont’d… )

Government grants

Government grants are recognized when there is reasonable assurance that (a) the Company will comply with the conditions attaching to them; and (b) the grant will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes the related costs for which the grants are intended to compensate.

Government grants in relation to the mineral exploration activities are recorded as a deduction of the carrying amount of the exploration and evaluation assets.

A forgivable loan is treated as a government grant when there is reasonable assurance that the Company will meet the terms for forgiveness of the loan. The benefit of a government loan at a below-market rate of interest is treated as a government grant.

Provision for environmental rehabilitation

The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of exploration and evaluation assets and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to the production assets along with a corresponding increase in the rehabilitation provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The rehabilitation asset is amortized on the same basis as mining assets.

The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to mining assets with a corresponding entry to the rehabilitation provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates. Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit or loss for the period.

Share-based payments

The Company uses the fair value method of accounting for share-based payments on stock option grants. Under this method, the cost of stock options is recorded based on the estimated fair value at the grant date, including an estimate of the forfeiture rate, and charged either to operations or capitalized to exploration and evaluation asset costs over the vesting period. The fair value is calculated using the Black-Scholes option pricing model.

Share-based payment transactions for employees and others providing similar services is determined based on the grant date fair value. Share-based payment for non-employees is determined based on the fair value of the goods or services received or option granted measured at the date on which the Company obtains such goods or services.

Each tranche in an option award is considered a separate award with its own vesting period. Share-based payment expense is recognized over each tranche’s vesting period, in earnings or capitalized as appropriate, based on the number of awards expected to vest. Where awards are forfeited, the expense previously recognized is proportionately reversed in the period the forfeiture occurs. If stock options are ultimately exercised, the applicable amounts of reserves are transferred to share capital.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

3. SIGNIFICANT ACCOUNTING POLICIES ( cont’d… )

Lease

Under IFRS 16, the Company recognizes right of use assets and lease liabilities for all leases except where the Company has elected to use the practical expedient to not recognize right-of-use assets and lease liabilities for lowvalue assets or short-term leases under 1 year that are not expected to renew. As of December 31, 2022 and 2021, the Company only had a short-term lease relating to office space where no right-of-use assets or lease liabilities were recognized.

Share purchase warrants

The fair value of warrants issued by the Company as a component of equity financing, their intrinsic fair value is bifurcated from the fair value of other securities issued, and is recorded as a component of equity reserves. When the warrants are granted as compensation for the receipt of goods or services, their fair value is determined using the BlackScholes option pricing model, which is recorded either as an expense or is capitalized to share capital or assets, on the same basis as equivalent cash payments.

When share purchase warrants are exercised, the cash proceeds and any amount previously recorded in equity reserves are recorded as share capital.

Loss per share

The Company computes the dilutive effect of options, warrants and similar instruments on loss per common share from the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the period. For the years presented, this calculation proved to be anti-dilutive. Basic loss per share is calculated using the weighted average number of common shares outstanding during the year.

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 subscription agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On issuance, proceeds are allocated first to share capital up to the fair value of the common shares at the time of issuance, determined by reference to the quoted market price of the common shares on the issuance date, with the residual amount of proceeds, if any, allocated to a flowthrough share premium. The flow-through share premium represents the estimated premium investors pay for the flowthrough feature and is recognized as a liability. Upon expenses being incurred, the Company derecognizes a deferred tax liability for the amount of tax reduction renounced to the shareholders. The premium is recognized as other income and the related deferred tax is recognized as a tax provision.

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 portion of the proceeds received but not yet expended at the end of the Company’s fiscal period is disclosed separately as flow-through share premium.

The Company may also be subject to a Part XII.6 tax on flow-through proceeds renounced under the “Look-back” Rule, in accordance with Government of Canada flow-through regulations. When applicable, this tax is accrued as a financial expense until paid.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

3. SIGNIFICANT ACCOUNTING POLICIES ( cont’d… )

Income taxes

Income taxes comprise current and deferred tax. Current tax is the expected tax payable or receivable on the taxable income or loss for the year using enacted tax rates at the reporting date. Deferred tax is calculated using the liability method on temporary differences between the carrying values of assets and liabilities and their respective income tax bases, except for temporary differences in assets and liabilities arising in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, transactions relating to investments in jointly controlled entities to the extent that they will not reverse in the foreseeable future, and transactions arising on the initial recognition of goodwill.

Deferred tax assets and liabilities are measured at the enacted tax rates that are expected to apply when the assets are recovered and the liabilities settled. Deferred tax assets are recognized for unused tax losses, tax credits and deductible temporary differences to the extent that future taxable income will be available against which they can be used.

Financial instruments

The Company recognizes a financial asset or a financial liability in its statements of financial position when it becomes party to the contractual provisions of the instrument. At initial recognition, the Company measures a financial asset or a financial liability at its fair value plus or minus, in the case of a financial asset or a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or the financial liability.

Financial assets

The Company will classify financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss, based on its business model for managing the financial asset and the financial asset’s contractual cash flow characteristics. The three categories are defined as follows:

a) Amortized cost - a financial asset is measured at amortized cost if both of the following conditions are met: - the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; 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.

b) Fair value through other comprehensive income - financial assets are classified and measured at fair value through other comprehensive income if they are held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.

c) Fair value through profit or loss (“FVTPL”) - any financial assets that are not held in one of the two business models mentioned are measured at FVTPL.

When, and only when, the Company changes its business model for managing financial assets it must reclassify all affected financial assets.

The Company’s financial assets are comprised of cash which is classified as FVTPL, and due from related parties which are measured at amortized cost.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

3. SIGNIFICANT ACCOUNTING POLICIES ( cont’d… )

Financial instruments ( cont’d… )

Financial assets (cont’d…)

The Company derecognizes a financial asset if the contractual rights to the cash flows from the asset expire, or the Company transfers substantially all the risks and rewards of ownership of the financial asset. Any interests in transferred financial assets that are created or retained by the Company are recognized as a separate asset or liability. Gains and losses on derecognition are generally recognized in the consolidated statement of loss and comprehensive loss. However, gains and losses on derecognition of financial assets classified as financial assets measured at fair value through other comprehensive income (“FVTOCI”) remain within accumulated other comprehensive loss.

Financial liabilities

The Company’s liabilities include accounts payable and accrued liabilities, due to related parties and loans which are all measured at amortized cost. After initial recognition, an entity cannot reclassify any financial liability.

The Company derecognizes a financial liability when the financial liability is discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the profit or loss.

Financial assets and liabilities are offset, and the net amount is presented in the consolidated statement of financial position only when the Company has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Impairment

The Company assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortized cost and fair value through other comprehensive income. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated amortization and any impairment charges. The cost of an item of property, plant and equipment includes the purchase price and related costs in bringing the item to the location and preparing the condition necessary for its intended use, as well as the estimated costs of dismantling, removing the item and restoring the site on which the item is installed.

Amortization expense of assets used in exploration are capitalized to exploration and evaluation assets. Amortization is recorded on a straight-line basis over the expected useful lives of the assets as follows:

Geological equipment 36 months

Management judgments and estimates

The preparation of these consolidated financial statements in accordance with IFRS requires management’s use of estimates, assumptions and judgment that impact the Company’s reported financial results. These estimates are based on past experiences and expectations of future events. Uncertainty on these judgments could result in material differences of the carrying amounts in the Company’s financial position.

The key judgments and estimates that affect the consolidated financial statements are:

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

3. SIGNIFICANT ACCOUNTING POLICIES ( cont’d… )

Management judgments and estimates (cont’d…)

Impairment of exploration and evaluation assets (E&E assets)

The Company carries out an impairment assessment on its E&E assets when circumstances indicate their carrying values may exceed their recoverable amounts. The process of determining the impairment involves significant judgment and estimation on the recoverability of the E&E assets as it relies on both an interpretation of geological and technical data as well as market conditions including commodity prices, investor sentiment and global financing. As new information comes up, the recoverable amounts of the assets and the impairment loss may differ from these judgments and estimates.

New, amended and future accounting pronouncements

Accounting standards and amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s financial statements.

4. LONG-TERM DEPOSITS

During the year ended December 31, 2022, the Company received a refund of $3,500 (2021 – made a net deposit of $5,252) from the Government of Northwest Territories, and paid $15,000 (2021 - $Nil) to the Government of Nunavut in regards with various permit and license applications. As December 31, 2022, the Company has total refundable deposits of $79,032 (December 31, 2021 - $67,532).

5. EQUIPMENT

Cost Balance, December 31, 2020 and 2021 Additions Balance, December 31, 2022	Geological equipment
	$ - 35,045
	$ 35,045
Accumulated amortization Balance, December 31, 2020 and 2021 Additions Balance, December 31, 2022	$ - 8,761
	$ 8,761
At December 31, 2021 At December 31, 2022	$ -
	$ 26,284

During the year ended December 31, 2022, amortization of $8,761 (2021 - $Nil) was recorded in exploration and evaluation assets.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

6. EXPLORATION AND EVALUATION ASSETS

	Project 939	EA South		Project		Project
	(Northwest	(Northwest		Tasijuaq		NagVaak		Project Mel
	Territories)	Territories)		(Nunavut)		(Nunavut)		(Nunavut)	Total
Balance, December 31, 2020	$ 544,501	$ 316,949	$	-	$	-	$	-	$ 861,450
Acquisition	25,000	25,000		-		-		-	50,000
Staking costs and lease payments	-	-		30,175		3,165		-	33,340
Exploration
Assay	21,101	-		-		-		-	21,101
Camp costs	-	-		-		-		68,617	68,617
Community	690	690		-		-		-	1,380
Data	30,614	8,556		-		-		-	39,170
Geology	79,016	-		-		-		-	79,016
Consulting (Note 9)	141,701	8,000		-		-		-	149,701
Field	1,285	1,996		-		-		-	3,281
License and permitting	2,204	1,734		4,896		-		-	8,834
Geological survey	121,419	-		-		-		-	121,419
Travel	11,249	-		-		-		-	11,249
Government grant	(51,000)	-		-		-		-	(51,000)
Balance, December 31, 2021	927,780	362,925		35,071		3,165		68,617	1,397,558
Acquisition	25,000	25,000		-		-		-	50,000
Staking costs and lease payments	-	-		2,340		5,330		-	7,670
Exploration
Amortization (Note 5)	-	2,920		-		5,841		-	8,761
Assay	-	5,765		-		20,667		-	26,432
Camp	-	-		-		184,778		-	184,778
Community	690	690		-		-		-	1,380
Consulting (Note 9)	53,250	118,875		-		50,875		-	223,000
Data	7,575	22,188		-		15,469		-	45,232
Drilling	-	-		-		99,754		-	99,754
Equipment rental	-	-		-		76,009		-	76,009
Field	-	28,238		-		115,760		-	143,998
Flight and helicopter	-	-		-		778,293		-	778,293

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

6. EXPLORATION AND EVALUATION ASSETS (cont’d…)

		Project 939		EA South		Project		Project
		(Northwest		(Northwest		Tasijuaq		NagVaak		Project Mel
		Territories)		Territories)		(Nunavut)		(Nunavut)		(Nunavut)		Total
Fuel		-		-		-		339,300		-		339,300
License and permitting		1,955		-		-		38,841		-		40,796
Geology		-		-		1,800		90,954		-		92,754
Geophysical		-		31,857		-		-		-		31,857
Travel		-		5,591		-		78,413		-		84,004
Government grant		-		-		-		(7,805)		-		(7,805)
Balance,December 31,2022	$	1,016,250	$	604,049	$	39,211	$	1,895,644	$	68,617	$	3,623,771

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

6. EXPLORATION AND EVALUATION ASSETS ( cont’d… )

Project 939 and EA South, Northwest Territories, Canada

On September 24, 2018, the Company entered into a Letter of Agreement (the “Agreement”) with Hunter Exploration Group. Pursuant to the terms of the Agreement, the Company will acquire 100% of interest in the Project 939 and EA South Project located in the Northwest Territory, Canada. Project 939 and EA South comprises 12 prospecting permits (93,821 hectares) and 16 mining claims (12,638 hectares). The Agreement was replaced by a Property Purchase Agreement dated January 11, 2021 and subsequently amended on October 8, 2021 and then on December 20, 2022. According to the Property Purchase Agreement and the amendments, the Company will have the following obligations:

Cash payments

$100,000 On or before July 3, 2018 (paid) $100,000 On or before August 17, 2018 (paid) $50,000 On or before July 1, 2019 (paid) $50,000 On or before July 1, 2021 (paid) $50,000 On or before July 1, 2022 (paid) $350,000

Work Commitment

$300,000 By December 31, 2018 $700,000 By December 31, 2019 $1,000,000 By December 31, 2020 $2,000,000 By December 31, 2021 $4,000,000 (Amended to complete the total amount by December 31, 2024)

As of December 31, 2022, the Company has incurred accumulatively $1,663,299 (December 31, 2021 - $1,383,705) of exploration and evaluation assets.

Share payments

Issue 1,500,000 share units within 10 days of completing the $4,000,000 work commitment (Amended to issue the shares no later than January 10, 2025). Each share unit will be comprised of one common share of the Company and one share purchase warrant. Each warrant will be exercisable into one common share of the Company at a price of $0.50 per share for a period of five years from the date of issuance.

Annual Advanced Royalty Payment (“AARP”)

Commencing July 1, 2023 (Amended to July 1, 2025), a $100,000 AARP to be paid on or before July 1 and that of each subsequent year until the commencement of commercial production.

Royalties

The Project is subject to 2% Net Smelter Royalty and a 2% Gross Overriding Royalty on diamonds.

Government grant

During the year ended December 31, 2022, the Company received government grants of $102,000 (2021 - $51,000) from the Government of the Northwest Territories (the “GNWT”). The GNWT’s contribution is towards mineral expenditure incurred by the Company on the Project 939 and EA South. The Company recorded the $102,000 as deferred government grant at December 31, 2022 which will be recognized to reduce the exploration and evaluation assets when all reporting requirements are met under the grant agreement.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

6. EXPLORATION AND EVALUATION ASSETS ( cont’d… )

Project Tasijuaq (previously “Project N”), Nunavut, Canada

During the year ended December 31, 2021, the Company staked 13 claims (“Project N”), 9,646 hectares located adject and outside of Mel Project (see note below), at the Melville Peninsula region of Nunavut, Canada. The staking cost is $30,175. In March 2022, the Company staked additional 4 claims, 1,013 hectares, at a cost of $2,340, and changed the project name from Project N to Project Tasijuaq.

Project NagVaak, Nunavut, Canada

Effective August 1, 2021, the Company entered into a Mineral Exploration Agreement with Nunavut Tunngavik Incorporated (“NTI”), pursuant to which, the Company obtained a renewable 20-year lease with an area of approximately 2,665 hectares expiring on July 31, 2041.

Annual fees

Year	Annual fees	Due date
	($/hectare/year)
1	1	On signing (paid)
2-5	2	On 1st (paid), 2nd, 3rd and 4th anniversary dates
6-10	3	On 5th, 6th, 7th, 8th and 9th anniversary dates
11-15	4	On 10th, 11th, 12th, 13th and 14th anniversary dates
16-20	5	On 15th, 16th, 17th, 18th and 19th anniversary dates

Minimum annual exploration work requirement

Year	Minimum annual work requirement
	($/hectare/year)
1-2	5 (Year 1 met)
3-5	10
6-10	20
11-15	30
16-20	40

Government grant

During the year ended December 31, 2022, the Company received government grants of $7,805 (2021 - $Nil) from the Government of Nunavut for its community engagement support program.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

6. EXPLORATION AND EVALUATION ASSETS ( cont’d… )

Project Mel, Nunavut, Canada

Pursuant to an agreement with North Arrow Minerals Inc. dated January 13, 2021, the Company acquired 100% of the non-diamond mineral rights in respect of 46 mineral claims (covering approximately 56,075 ha of land) in Nunavut, commonly referred to as the “ MEL Project ”, subject to a 1% gross overriding royalty on non-diamond mineral production from the property, half of which royalty may be purchased at any time by the Company for $1,000,000. This royalty applies to any property owned by the Company within an area of interest extending up to 5 km from the Mel Project boundary. Pursuant to the same agreement, the Company will be granted a 2% gross overriding diamond royalty (reduced to 1% in areas where there is an existing underlying royalty) over the same property, half of which royalty may be purchased by North Arrow Mines Inc. at any time for $2,000,000. As consideration being paid for Mel Project, both the 1% gross overriding royalty on non-diamond mineral production and the 2% gross overriding royalty are valued at $Nil.

Under the agreement, the parties also agreed to share exploration infrastructure in support of their respective exploration and evaluation efforts on the Melville Peninsula and accordingly also entered into a camp and permit sharing arrangement. During the year ended December 31, 2022, the Company accrued $Nil (2021 - $68,617) of camp costs.

Title to resource properties

Although the Company has taken steps to verify the title to exploration properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements or transfers and title may be affected by undetected defects.

Realization of assets

The investment in and expenditures on exploration properties comprise a significant portion of the Company’s assets. Realization of the Company’s investment in these assets is dependent upon the establishment of legal ownership, the attainment of successful production from the properties or from the proceeds of their disposal. Resource exploration and development is highly speculative and involves inherent risks. While the rewards if an ore body is discovered can be substantial, few properties that are explored are ultimately developed into producing mines. There can be no assurance that current exploration programs will result in the discovery of economically viable quantities of ore.

The amounts shown for acquisition costs and deferred exploration expenditures represent costs incurred to date and do not necessarily reflect present or future values. These costs will be depleted over the useful lives of the properties upon commencement of commercial production or written off if the properties are abandoned or the claims are permitted to lapse.

Environmental

The Company is subject to the laws and regulations relating to environmental matters in all jurisdictions in which it operates, including provisions relating to property reclamation, discharge of hazardous material and other matters. The Company may also be held liable should environmental problems be discovered that were caused by former owners and operators of its properties and properties in which it has previously had an interest. The Company conducts its mineral exploration activities in compliance with applicable environmental protection legislation. The Company is not aware of any existing environmental problems related to any of its current or former properties that may result in material liability to the Company. Environmental legislation is becoming increasingly stringent and costs and expenses of regulatory compliance are increasing. The impact of new and future environmental legislation on the Company’s operations may cause additional expenses and restrictions. If the restrictions adversely affect the scope of exploration and development on the resource properties, the potential for production on the property may be diminished or negated.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

7. LOANS

Loans from CEO

On August 31, 2018, the Company entered into a loan agreement with Darren Bahrey, the CEO. The loan principal amount is $100,000. The loan bears an interest at 10% per annum and has no fixed term of repayment. On June 13, 2019, the Company repaid the loan principal of $50,000 and interest of $3,932. During the year ended December 31, 2021, the Company fully repaid the remaining $50,000 principal and interest of $13,096 to the CEO.

Canada Emergency Business Account (“CEBA”) loan

On April 30, 2020, the Company received $40,000 of CEBA loan from Bank of Montreal. The loan is interest free, and $10,000 of the loan is eligible for loan forgiveness if $30,000 has been fully repaid on or before December 31, 2022. It also has no principal repayments during this period. The loan was recorded at a fair value of $23,257 using an effective rate of 10%, considering the grant, the interest- free loan and the forgivable portion. The residual value of $16,743 is recorded as other income.

In January 2022, the Company received a notice that the Government of Canada declined the Company’s application of CEBA loan, and the CEBA loan has been converted into a non-revolving term loan as of January 21, 2022. Accordingly, the Company reversed $12,727 of the previously recorded government grant, and restored the loan balance to its original principal amount at $40,000 as of December 31, 2021.

During the year ended December 31, 2022, interest of $Nil (2021 - $2,480) was recognized in the consolidated statements of loss and comprehensive loss. As of December 31, 2022, a balance of $40,000 (December 31, 2021 - $40,000) is recorded as short-term loans.

8. SHARE CAPITAL

Authorized - unlimited number of common shares without par value

Share issuance

At December 31, 2022, the Company had 32,652,679 (2021 – 24,853,263) common shares issued and outstanding.

During the year ended December 31, 2022:

i) On December 30, 2022, the Company closed a non-brokered private placement by issuing 63,600 common share units at $0.25 per unit and 1,200,000 flow-through common shares at a price of $0.30 per share for gross proceeds of $375,900. Each share unit is comprised of one common share and one half share purchase warrant, with each whole warrant being exercisable for one common share at a price of $0.40 per share for three years. In relation with the private placement, the Company paid $21,600 of finders’ fees, $2,351 filing fees and $16,500 legal fees.

ii) On December 2, 2022, the Company closed final tranche of a non-brokered private placement by issuing 660,600 common share units at $0.25 per unit and 335,000 flow-through common shares at a price of $0.30 per share for gross proceeds of $265,650. Each share unit is comprised of one common share and one half share purchase warrant, with each whole warrant being exercisable for one common share at a price of $0.40 per share for three years. In relation with the private placement, the Company paid $6,000 of finders’ fees. The Company allocated a value of $661 to warrants.

iii) On October 25, 2022, the Company closed first tranche of a non-brokered private placement by issuing 1,901,000 common share units at $0.25 per unit and 803,166 flow-through common shares at a price of $0.30 per share for gross proceeds of $716,200. Each share unit is comprised of one common share and one half share purchase warrant, with each whole warrant being exercisable for one common share at a price of $0.40 per share for three years. In relation with the private placement, the Company paid $30,621 of finders’ fees.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

8. SHARE CAPITAL (cont’d…)

iv) On June 30, 2022, the Company closed a non-brokered private placement by issuing 2,836,050 share units at $0.30 per unit for total proceeds of $850,815. Each share unit is comprised of one common share and one half share purchase warrant, with each whole warrant being exercisable for one common share at a price of $0.45 per share for three years. The Company paid $18,000 of finder’s fee and accrued $7,000 legal fees.

During the year ended December 31, 2021:

i) the Company issued 6,816,096 shares at $0.15 per share for total proceeds of $1,022,415. The Company paid $14,400 of cash finder’s fees.

ii) the Company issued 80,000 shares at $0.25 per share for total proceeds of $20,000.

iii) the Company issued 800,000 shares pursuant to exercise of 800,000 warrants at $0.10 per share for total proceeds of $80,000.

iv) In July and September 2021, the Company closed a non-brokered private placement by issuing 1,852,500 special warrants at $0.25 per share for total proceeds of $463,125. The Company paid $15,000 of finder’s fee. Each special warrant will be automatically exchanged into one common share of the Company with no additional cost. In November and December 2021, the 1,852,500 special warrants were automatically converted into 1,852,500 common shares of the Company.

v) the Company accrued legal fee of $43,122 for the issuance of shares and special warrants.

Share escrow

In accordance with National Policy 46-201 - Escrow for Initial Public Offerings of the Canadian Securities Administrators, certain principals of the Company entered into escrow agreements with the Company and its transfer agent. Pursuant to the escrow agreements, 3,920,001 shares and 1,650,000 warrants were escrowed for a period of 36 months on December 17, 2021. During the escrowed period, the securityholders are not permitted to sell, transfer, assign, mortgage, or enter into a derivative transaction in regards with the escrowed securities. The escrowed securities were released by 10% on January 10, 2022, the date the Company’s shares are listed for trading on CSE, and then 15% every six months thereafter. As of December 31, 2022, 2,940,001 shares remain in escrow.

Stock options

On March 31, 2021, the Company adopted a stock option plan whereby the Board of Directors may, from time to time, grant options to directors, officers, employees and consultants. The term of the option grants is up to ten years and the vesting schedule, if any, will be determined by the Board of Directors. The maximum number of common shares reserved for issue shall not exceed 15% of the total number of common shares issued and outstanding as at the grant date.

On January 10, 2022, the Company granted incentive stock options to certain directors, officers, employees, and consultants of the Company to purchase up to an aggregate of 2,100,000 common shares of the Company. These options are exercisable for a period of five years at a price of $0.25 per share. All options will vest as to 10% on the date of grant, and a further 15% every three months thereafter. The fair value of the stock options granted was $477,716 ($0.23 per option) at the date of grant. During the year ended December 31, 2022, $434,917 was amortized and recorded in the consolidated statements of loss and comprehensive loss.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

8. SHARE CAPITAL (cont’d…)

Stock options (cont’d…)

The fair value of the stock options granted was determined using the Black-Scholes option price modelling with the following assumptions:

	Year ended
Weighted average assumptions	December 31, 2022
Risk free interest rate	1.51%
Volatility	150%
Expected life of options	5 years
Dividend rate	0%

Expected volatility is based on comparable publicly listed entities.

Stock option transactions are summarized as follows:

	Number of Options Weighted Average Exercise Price
Balance, December 31, 2020 and 2021 Granted Balance, December 31, 2022	- $ - 2,100,000 0.25
	2,100,000 $ 0.25
Exercisable,at December 31,2022	1,155,000 $ 0.25

At December 31, 2022, the Company has the following outstanding stock options outstanding:

Number	Exercise
ofOptions	Price	ExpiryDate
2,100,000	$ 0.25	January10,2027

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

8. SHARE CAPITAL (cont’d…)

Warrants

On December 30, 2022, the Company closed a non-brokered private placement by issuing 63,600 share units at $0.25 per unit for total proceeds of $15,900. Each share unit is comprised of one common share and one-half share purchase warrant, with each whole warrant being exercisable for one common share at a price of $0.40 per share for three years. The fair value of the 31,800 warrants was $Nil by using the residual value method.

On December 2, 2022, the Company closed final tranche of a non-brokered private placement by issuing 660,600 share units at $0.25 per unit for total proceeds of $165,150. Each share unit is comprised of one common share and one-half share purchase warrant, with each whole warrant being exercisable for one common share at a price of $0.40 per share for three years. The fair value of the 330,300 warrants was $661 by using the residual value method.

On October 25, 2022, the Company closed first tranche of a non-brokered private placement by issuing 1,901,000 share units at $0.25 per unit for total proceeds of $475,250. Each share unit is comprised of one common share and one-half share purchase warrant, with each whole warrant being exercisable for one common share at a price of $0.40 per share for three years. The fair value of the 950,500 warrants was $Nil by using the residual value method.

On June 30, 2022, the Company closed a non-brokered private placement by issuing 2,836,050 share units at $0.30 per unit for total proceeds of $850,815. Each share unit is comprised of one common share and one-half share purchase warrant, with each whole warrant being exercisable for one common share at a price of $0.45 per share for three years. The fair value of the 1,418,024 warrants was $Nil by using the residual value method.

In March and April 2021, the Company granted to directors, officers and consultants 1,050,000 warrants, exercisable at $0.15 per share for a term of 2 years from the Company’s completion of a liquidity event. A liquidity event means a merger, sale of the Company, or an initial public offering, or such other similar events as shall be determined by the Board of Directors in its sole discretion.

The fair value of the warrants granted was $120,519 (approximately $0.11 per warrant). During the year ended December 31, 2021, the Company recorded share-based compensation of $120,519 in the consolidated statements of loss and comprehensive loss.

The Company referred to other early-stage exploration companies in the similar area for its volatility estimation. The fair value of the warrants granted was determined using the Black-Scholes option price modelling with the following assumptions:

	Year ended
Weighted average assumptions	December 31, 2021
Risk free interest rate	0.30%
Volatility	150%
Expected life of options	2.5 years
Dividend rate	0%

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

8. SHARE CAPITAL (cont’d…)

Warrants (cont’d…)

The continuity of the Company’s warrants for the years ended December 31, 2022 and 2021 is as follows:

	Number ofWarrants	Weighted Average ExercisePrice
Balance, December 31, 2020 Granted Exercised Balance, December 31, 2021 Issued Balance, December 31, 2022	4,000,000 1,050,000 (800,000) 4,250,000 2,730,624 6,980,624	$ 0.10 0.15 0.10 0.11 0.43 $ 0.24

As at December 31, 2022, the following warrants are outstanding:

Number	Exercise
of Warrants	Price	Expiry Date
1,050,000	$ 0.15	January 10, 2024
3,200,000	$ 0.10	January 10, 2024
1,418,024	$ 0.45	June 30, 2025
950,500	$ 0.40	October 25, 2025
330,300	$ 0.40	December 2, 2025
31,800	$ 0.40	December 30,2025

The weighted average remaining life of the warrants in years is 1.67 (2021 – 2.04).

9. RELATED PARTY TRANSACTIONS

The Company entered into the following transactions with related parties during the year ended December 31, 2022:

a) the Company paid or accrued consulting fees of $51,000 (2021 - $51,000) in exploration and evaluation assets, and $51,000 (2021 - $51,000) in management fees to a company controlled by the CEO. As of December 31, 2022, the Company had $8,925 (2021 - $26,775) payable to the company controlled by the CEO and $15,968 (2021 - $Nil) payable to the CEO for reimbursement of expenses incurred on behalf of the Company.

b) the Company paid or accrued management fees of $90,000 (2021 - $82,500) to a company controlled by the CFO. As of December 31, 2022, the Company had $31,528 (2021 - $23,625) payable to the company controlled by the CFO.

c) the Company paid or accrued consulting fees of $56,000 (2021 - $63,000) in exploration and evaluation assets to a company controlled by the former VP Exploration. As of December 31, 2022, the Company had $Nil (2021 - $8,614) payable to the company controlled by the former VP Exploration.

d) 1,300,000 (2021 - Nil) stock options were granted to directors and officers having a fair value on issuance of $295,729 (2021 - $Nil), of which $269,234 (2021 - $Nil) was amortized and recorded in the consolidated statements of loss and comprehensive loss during the year ended December 31, 2022.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

9. RELATED PARTY TRANSACTIONS (cont’d…)

e) Nil (2021 – 1,000,000) warrants were granted to directors and officers having a fair value on issuance of $Nil (2021 - $114,780).

Due to related parties do not bear interest, are unsecured and repayable on demand.

Due from related party

On August 1, 2018, the Company and the CEO entered into a Revolving Line of Credit Agreement (“LOC”). Pursuant to the Agreement, the Company will make payments towards Project Green located in the Republic of Panama, of which the CEO currently holds the mineral property application. The LOC has a maximum funding amount of US$100,000, interest free, and repayable by July 31, 2025.

On June 15, 2021, the Company, the CEO and 10X Minerals Corp. (“10X”) entered into a loan Assignment and Assumption Agreement, pursuant to which 10X assumed the LOC from the CEO, and the Company consent to the assignment of the LOC from the CEO to 10X. The Company expect to have the loan settled with common shares of 10X. 10X was incorporated on March 10, 2021 under the laws of British Columbia, Canada, and is also controlled by the CEO. 10X is a junior exploration company focused on exploring diamonds and specialty minerals in Nunavut, Canada.

As of December 31, 2022 and 2021, the accumulated advance is US$99,543 (December 31, 2022 - $134,789; December 31, 2021 - $126,393).

10. FAIR VALUE MEASUREMENT AND RISK MANAGEMENT

IFRS 13, Fair Value Measurement, establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – 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 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The following table sets forth the Company’s financial instruments measured at fair value by level within the fair value hierarchy:

December 31, 2022		Level 1		Level 2			Level 3
Financial assets at FVTPL
Cash	$	539,021	$		-	$		-
December 31, 2021		Level 1		Level 2			Level 3
Financial assets at FVTPL
Cash	$	831,038	$		-	$		-

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

10. FAIR VALUE MEASUREMENT AND RISK MANAGEMENT (cont’d…)

Financial risk management

The Company’s objective in risk management is to maintain its ability to continue as a going concern. It is exposed to the following risks:

Liquidity risk

Liquidity risk is the risk that the Company might not be able to meet its obligations and commitments as they come due. As at December 31, 2022, the Company had cash of $539,021 (2021 - $831,038) and a working capital deficiency of $1,231,200 (2021 – working capital of $475,801).

Credit risk

Credit risk arises from cash held with financial institutions as well as credit exposure on outstanding receivables. The Company’s cash is held at high-credit rating financial institutions. Receivables only consist of refundable government goods and services tax. The Company has minimal credit risk.

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 equity prices.

i. Interest rate risk

Interest rate risk arises from changes in market rates of interest that could adversely affect the Company. The Company’s exposure to interest rate risk is insignificant.

ii. Foreign currency risk

Foreign currency risk arises from fluctuations in foreign currencies versus the Canadian dollar that could adversely affect reported balances and transactions denominated in those currencies. The Company currently has a due from related party balance which is denominated in U.S. Dollars. A 10% fluctuation in exchange rates between Canadian and U.S. Dollars would result in a $13,000 change in due from related party and foreign exchange loss. The Company does not use any techniques to mitigate foreign currency risk.

iii. Equity price risk

Equity price risk arises from market fluctuations in equity prices that could adversely affect the Company’s operations. The Company’s current exposure to equity price risk is limited to declines in the values and volumes including those of its own shares, which could impede its ability to raise additional funds when required.

11. CAPITAL MANAGEMENT

The Company’s capital management objective is to ensure its ability to continue as a going concern to meet its operational obligations and to maintain capital access to fund its mineral exploration activities in Northwest Territory and Nunavut, Canada.

The capital that the Company manages is the total of liabilities and equity on the consolidated statements of financial position. The Company may modify the capital structure to meet its funding needs by issuing new equity shares and/or debt instruments, disposing assets or bringing in joint venture partners. To facilitate the management of its capital, the Company prepares annual budgets approved by the Board of Directors. The budget is reviewed and updated periodically to account for changes in the expenditures and economic conditions. The Company is not subject to any externally imposed capital requirements.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

12. FLOW-THROUGH SHARE PREMIUM LIABILITIES

Flow-through share premium liabilities include the liability portion of the flow-through shares issued. The following is a continuity schedule of the liability portion of the flow-through shares issuances.

	Issued on October 25, 2022 Issued on December 2, 2022 Issued on December 30, 2022 Total
Balance, December 31, 2020 and 2021 Liability incurred on flow-through shares issued Settlement of flow-through share liability on incurring expenses Balance, December 31, 2022	$ - $ - $ - $ - 12,047 20,100 54,000 86,147 (12,047) (9,939) - (21,986)
	$ - $ 10,161 $ 54,000 $ 64,161

During the year ended December 31, 2022:

On October 25, 2022, the Company raised $240,950 through the issuance of 803,166 flow-through shares at a price of $0.30 per share. A flow-through liability of $12,047 (premium of $0.015 per share) was recognized on the issuance date. As at December 31, 2022, the Company incurred all of the $240,950 qualified expenditures.

On December 2, 2022, the Company raised $100,500 through the issuance of 335,000 flow-through shares at a price of $0.30 per share. A flow-through liability of $20,100 (premium of $0.06 per share) was recognized on the issuance date. The Company incurred $49,697 of qualified expenses as of December 31, 2022. The remaining $50,803 should be spent by the end of December 31, 2023.

On December 30, 2022, the Company raised $360,000 through the issuance of 1,200,000 flow-through shares at a price of $0.30 per share. A flow-through liability of $54,000 (premium of $0.45 per share) was recognized on the issuance date. The Company incurred $Nil of qualified expenses as of December 31, 2022. The Company should spend the $360,000 proceeds by the end of December 31, 2023.

13. SUPPLEMENT DISCLOSURE WITH RESPECT TO CASH FLOWS

	December 31,	December 31,	December 31,	December 31,
		2022		2021
Exploration and evaluation assets included in	$	700,421	$	72,308
accounts payable and accrued liabilities
Exploration and evaluation expenditures included in due to related	$	4,250	$	22,002
parties
Share issue costs included in accounts payable and accrued
liabilities	$	47,451	$	-
Amortization in exploration and evaluation assets	$	8,761	$	-
Prepaids in accounts payable and accrued liabilities	$	71,500	$	-
Interest paid	$	-	$	13,096
Taxes paid	$	-	$	-

14. SEGMENTED INFORMATION

The Company has one reportable operating segment, being the acquisition and exploration of mineral properties. At December 31, 2022 and 2021, the Company’s exploration and evaluation assets are located in Canada. All expenses and cash receipts pertaining to exploration and evaluation activities are capitalized.

STRATEGX ELEMENTS CORP. Notes to the consolidated financial statements (Expressed in Canadian dollars) For the years ended December 31, 2022 and 2021

15. INCOME TAXES

A reconciliation of income taxes at statutory rates (2022 – 27%; 2021 – 27%) with the reported taxes is as follows:

	Year ended	Year ended
	December 31,	December 31,
	2022	2021
Loss for theyear before income tax	$(1,954,032)	$(578,740)
Expected income tax (recovery)	$ (528,000)	$ (156,000)
Non-deductible differences	114,000	33,000
Change in unrecognized tax benefits	414,000	123,000
Total income tax expenses(recovery)	$ -	$ -

The following is the analysis of recognized deferred tax liabilities and deferred tax assets:

		2022		2021
Deferred tax liabilities
Exploration and evaluation assets	$	(81,000)	$	-
Deferred tax liabilities		(81,000)		-
Deferred tax assets
Non-capital losses		81,000		-
Deferred tax assets		81,000		-
Net deferred tax assets (liabilities)	$	-	$	-

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

		2022	Expiry Date Range		2021	Expiry Date Range
Temporary differences:
Share issue costs	$	126,000	2043 – 2046	$	60,000	2043 - 2045
Equipment	$	9,000	No expiry date	$	-	Not applicable
Non-capital losses available
for futureperiods	$	2,218,000	2038 – 2042	$	648,000	2038 – 2041

Tax attributes are subject to review, and potential adjustment, by tax authorities.