Surface Metals Inc. - Interim / Quarterly Report 2024

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ACME LITHIUM INC.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE PERIOD ENDED DECEMBER 31, 2023, AND 2022 (With Comparative AUDITED Figures as at SEPTEMBER 30, 2023) (In Canadian dollars)

Notice of No Auditor Review of Interim Condensed Financial Statements

The accompanying unaudited interim condensed financial statements have been prepared by management and approved by the Audit Committee.

The Company’s independent auditors have not performed a review of these interim condensed financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditors.

February 27, 2024

ACME LITHIUM INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT DECEMBER 31, 2023 AND SEPTEMBER 30, 2023

(Expressed in Canadian dollars)

	Note	December 31, 2023	September 30, 2023
		(Unaudited)	(Audited)
ASSETS
Current assets
Cash and cash equivalents	4 5	$ 325,139	$ 292,538
Amounts receivable		26,851	39,468
Prepaid expenses		54,137	99,148
	5 6 7 8	406,128	431,154
Noncurrent assets
Prepaid expenses and deposits		105,912	113,943
Right-of-use asset		146,721	156,086
Equipment		355,158	487,229
Exploration and evaluation properties		11,722,941	11,858,801
		12,330,732	12,616,059

Total assets		$ 12,736,859	$ 13,047,213
	9 6 13
SHAREHOLDERS’ EQUITY AND LIABILITIES

Current liabilities
Accounts payable and accrued liabilities		$ 408,424	$ 526,060
Current portion of lease liability		29,357	27,830
Due to related parties		6,471	-
	6	444,252	553,890

Non-current liabilities Non-current portion of lease liability		129,764	137,664
Total liabilities		$ 574,016	$ 691,554
	10 11,12
Shareholders’ equity
Share capital		$ 16,375,224	$ 16,109,186
Reserves		3,196,727	3,194,116
Subscriptions receivable		(52,500)	-
Accumulated other comprehensive income		2,753	173,353
Deficit		(7,359,361)	(7,120,996)

Total shareholders’ equity		12,162,843	12,355,659
Total shareholders’ equity and liabilities		$ 12,736,859	$ 13,047,213

Nature and continuation of operations (Note 1) Commitments ( Note 19 )

APPROVED ON BEHALF OF THE BOARD OF DIRECTORS ON February 27, 2024

“Vivian Katsuris” “Ioannis Tsitos” Vivian Katsuris, Director Ioannis Tsitos, Director

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

ACME LITHIUM INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE PERIODS ENDED DECEMBER 31, 2023 AND 2022

(Unaudited - Expressed in Canadian dollars)


	Note	December 31, 2023	December 31,2022

Operating expenses
Business development	18	$ 23,926	$ 223,562
Professional fees	18	126,877	115,799
General and administrative	18	121,668	117,838
Net loss before other income (expense)		(272,471)	(457,199)

Other income (expense)
Rental income		7,500	-
Forex loss		(1,299)	(5,565)
Interest income		227	60,491
Gain on sale of equipment		24,557	-
Flowthrough recovery		-	53,767
Other income		3,122	-
Net income(loss) for theperiod		$ (238,365)	$ (348,506)

Other comprehensive loss
Foreign currency translation loss)		(170,599)	(15,987)
Comprehensive loss for theperiod		$ (408,964)	$ (364,493)

Weighted average number of shares – basic and diluted		60,348,798	48,014,146

Loss per share– basic and diluted		$ (0.00)	$ (0.01)

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

ACME LITHIUM INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE PERIODS ENDED DECEMBER 31, 2023 AND 2022

(Unaudited - Expressed in Canadian dollars)

		SHARE	CAPITAL
					Accumulated
					other
	Number of			Subscriptions	comprehensive
	shares	Amount	Reserves	receivable	income	Deficit	Total
	#	$	$	$	$	$	$
Balances, September 30, 2022	53,496,067	15,219,436	3,194,116	-	237,801	(5,416,267)	13,235,086
Shares issued for:
Mineral properties	100,000	41,000	-		-	-	41,000
Warrants exercised	4,775,000	477,500	-		-	-	477,500
Net loss and comprehensive loss for the year	-	-	-		(15,987)	(348,506)	(364,493)
Balances,December 31,2022	58,371,067	15,737,936	3,194,116	-	221,814	(5,764,773)	13,389,093

Balances, September 30, 2023	59,121,067	16,109,186	3,194,116	-	173,353	(7,120,996)	12,355,659
Shares issued for:
Private placement	1,851,660	277,749	-	-	-	-	277,749
Subscription receivable	-	-	-	(52,500)	-	-	(52,500)
Finder’s warrants	-	(2,611)	2,611	-	-	-	-
Share issuance costs	-	(9,100)	-	-	-	-	(9,100)
Net loss and comprehensive loss for the year	-	-	-	-	(170,600)	(238,365)	(408,965)
Balances, December 31, 2023	60,972,727	16,375,224	3,196,727	(52,500)	2,753	(7,359,361)	12,162,843

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

ACME LITHIUM INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED DECEMBER 31, 2023 AND 2022

(Unaudited - Expressed in Canadian dollars)

	December 31, 2023	December 31, 2022

OPERATING ACTIVITIES
Net loss for the period	$ (238,365)	$ (348,506)
Adjustments for:
Depreciation	22,405	12,101
Flow-through recovery	-	(53,767)
Interest on lease liability	7,354	-
Gain on sale of equipment	(24,557)	-
Changes in non-cash working capital items:
Accounts receivable	12,617	(60,072)
Prepaid expenses	31,857	(146,518)
Accounts payable and accrued liabilities	(147,159)	135,419
Due to related parties	6,471	-
Cash used in operating activities	$ (329,377)	$ (461,343)

INVESTING ACTIVITIES
Acquisition of machinery and equipment	-	(406,790)
Proceeds from sale of equipment	143,588	-
Proceeds from Earn-in Option	20,000	-
Exploration and evaluation expenditures	(2,675)	(1,055,901)
Cash used in investing activities	$ 160,913	$ (1,462,691)

FINANCING ACTIVITIES
Proceeds from issuance of common shares	216,149	477,500
Share issuance costs	-	-
Flowthrough liability	-	-
Lease liability payment	(13,728)	(1,426)
Cash provided by financing activities	$ 202,421	$ 476,074

Change in cash and cash equivalents	33,956	(1,447,960)
Effect of foreign exchange rate in cash	(1,355)	(15,987)
Cash and cash equivalents, beginning ofperiod	$ 292,538	$ 9,816,956

Cash and cash equivalents, end of period	$ 325,139	$ 8,353,009

Cash	$ 295,637	$ 2,232,803
Cash equivalents	$ 29,502	$ 6,120,206

Supplemental cash flow information (Note 17)

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

ACME LITHIUM INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE PERIODS ENDED DECEMBER 31, 2023, AND 2022 (Unaudited – Prepared by Management) (Expressed in Canadian dollars)

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1. NATURE AND CONTINUANCE OF OPERATIONS

ACME Lithium Inc. (the “Company”) was incorporated under the provisions of the Business Corporations Act of British Columbia on January 31, 2017. On November 23, 2020, the Company changed its name from Hapuna Ventures Inc. to ACME Lithium Inc. and changed its principal business from technology to a mineral exploration company.

The Company’s corporate office is located at 318 - 1199 W Pender St, Vancouver, British Columbia, Canada, V6E 2R1 and its registered and records office address is at 2900-733 Seymour Street, Vancouver, British Columbia, Canada V6B 0S6. The Company’s common shares are traded on the Canadian Securities Exchange (“CSE”) under the symbol “ACME” and on the OTCQB Best Market (“OTCQXB”) under the symbol “ACLHF”.

The Company is a mineral exploration company engaged in the acquisition, exploration and evaluation of natural resource properties located in the State of Nevada, USA, and Manitoba, Canada. To date, no mineral development projects have been completed and no commercial development or production has commenced.

As at December 31, 2023, the Company has not yet determined whether the properties are economically recoverable. The recoverability of amounts shown for exploration and evaluation properties is dependent upon the discovery of economically recoverable reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain the necessary financing to complete the development of and future profitable production from the properties or realizing proceeds from their disposition.

The Company is a reporting issuer in the Province of British Columbia, Alberta, and Ontario. All public filings for the Company can be found on the SEDARPLUS website www.sedarplus.c a.

Background

The Company was incorporated under the provisions of the Business Corporations Act of British Columbia on January 31, 2017, as a wholly owned subsidiary of Kona Bay Technologies Inc. (“Kona Bay”) whose line of business was in technology. By December 19, 2020, the Company had disposed of all its digital business and related outstanding obligations to an arm-length purchaser.

On December 29, 2020, the Company entered into an Amalgamation Agreement (the “Amalgamation Agreement”) with 1281524 B.C. Ltd. (“Subco”) and 1266291 B.C. Ltd. (“Fundco”) which closed on December 30, 2020. Pursuant to the Amalgamation Agreement, the following occurred: (i) Subco and Fundco amalgamated. (ii) The unit holders of Fundco received an equivalent number of units of the Company; and (iii) The amalgamated Company, “Amalco” became a wholly owned subsidiary of the Company.

Going concern

These interim condensed consolidated financial statements (the “financial statements”) have been prepared on a going concern basis, assuming that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. As of December 31, 2023, the Company had a deficit of $ 7,359,361 (September 30, 2023 - $7,120,996) and a working capital of $ 14,375 (September 30, 2023 – working capital deficit of $260,400). The Company expects to incur further losses in the development of its business.

As the Company is in early-stage mineral exploration and it does not generate revenues, the continuing operations of the Company are dependent upon obtaining, in the short term, the necessary financing to meet the Company’s operating commitments as they come due. There are no assurances that the Company will be able to obtain additional financial resources and/or achieve positive cash flows or profitability. These circumstances comprise a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern. There have been continuous efforts from management to maintain the Company’s working capital position as evidenced in events subsequent to period end (Note 20).

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1. NATURE AND CONTINUANCE OF OPERATIONS (continued)

Over the past year, global stock markets have experienced great volatility and a significant weakening in the aftermath of COVID-19. Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions. Volatility in financial markets subsequent to December 31, 2023, may have a significant impact on the Company’s financial position. The duration and impact of the higher inflationary environment, as well as the effectiveness of government and central bank responses, remains unclear at this time.

2. BASIS OF PREPARATION

a) Statement of compliance

These financial statements have been prepared in accordance with International Accounting Standards (“IAS”) 34 ‘Interim Financial Reporting’ issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), and in accordance with the same accounting policies and methods of computation as compared with the most recent annual financial statements, being for the year ended September 30, 2023.

These financial statements were approved and authorized for issue in accordance with a resolution from the Board of Directors on February 27, 2024.

b) Basis of Measurement

These financial statements have been prepared on a historical cost basis, except for certain financial instruments, classified as financial instruments at fair value through profit or loss which are stated at fair value. In addition, these financial statements have been prepared using the accrual basis of accounting except for cash flow information.

c) Basis of Consolidation

These financial statements include the accounts of the Company and its subsidiary, ACME Lithium US Inc. (“ACME US”). Effective December 16, 2021, the Company amalgamated with its previously wholly owned subsidiary, 1266291 BC Ltd., and will continue to act as one company under the name ACME Lithium Inc. The financial statements of the Company’s subsidiaries have been consolidated from the date that control commenced. Control is achieved when the Company has the power to govern the financial operating policies of an entity to obtain the benefits from its activities. All intercompany balances and transactions and income and expenses have been eliminated upon consolidation.

d) Presentation and Functional Currency

These interim condensed consolidated financial statements are presented in Canadian dollars, which is the functional currency of the parent Company. The functional currency of the Company’s wholly owned US subsidiary, ACME US, is in US dollars.

Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each financial position reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at the date of the statement of financial position. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Revenues and expenses are translated at the exchange rates prevailing on the dates of the transactions. Exchange gains and losses arising on translation are included in profit or loss.

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2. BASIS OF PREPARATION (continued)

For the purpose of presenting financial statements, the assets and liabilities of ACME US are translated into Canadian dollars at the spot rate at the date of the statement of financial position. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during the period, in which case exchange rates at the dates of the transactions are used. Exchange differences are recognized in other comprehensive income and reported as a currency translation adjustment in equity.

3. MATERIAL ACCOUNTING POLICIES

Critical accounting judgments, estimates and assumptions – The preparation of the Company’s financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Critical Judgments

Going concern of operations - Management has made the determination that the Company will continue as a going concern for the following year.

Title to exploration assets - Although the Company has taken steps to verify title to its exploration properties, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfer and title may be affected by undetected defects.

Flow-through shares - the Company determines the flow-through share premium by allocating the total funds received between common share and flow-through premium liability by first assessing the fair value of the common shares issued, based on market price at issuance, with any excess considered being allocated to warrants (if any) and the flow-through premium.

Estimates

Share-based compensation - Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them.

Finder’s warrants - Finders warrants are valued using the Black-Scholes option pricing model with assumptions such as volatility, risk free rate, and expected dividend. These assumptions are made based on the conditions prevalent on the date of issuance.

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3. MATERIAL ACCOUNTING POLICIES (continued)

Sale of Royalty - Management’s assessments related to the recognition of revenues for arrangements are based on estimates and assumptions. Where deferral of cash consideration about gross revenue royalty agreement is deemed appropriate, subsequent revenue recognition is often determined based on certain assumptions and estimates, the Company’s continuing involvement in the arrangement and the benefits expected to be derived by the purchaser.

Impairment of exploration and evaluation assets - The application of the Company’s accounting policy for exploration and evaluation expenditure requires judgment in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available.

Estimates (continued)

Deferred income taxes - The determination of deferred income tax assets or liabilities requires subjective assumptions regarding future income tax rates and the likelihood of utilizing tax carry forwards. Changes in these assumptions could materially affect the recorded amounts, and therefore do not necessarily provide certainty as to their recorded values.

Useful lives of property and equipment – Management exercises professional judgement when determining the useful life and residual values of property and equipment. Management estimates these inputs based on industry standards and previous experience assessing similar capital assets.

Leases – The application of IFRS 16 Leases requires the Company to make judgments and estimates that affect the measurement of right‐of‐use assets and liabilities. In determining the lease term, all facts and circumstances that create an economic incentive to exercise renewal options (or not exercise termination options) are considered. Assessing whether a contract includes a lease also requires judgment. Estimates are required to determine the incremental borrowing rate to measure liabilities where the interest rate in the lease is not readily available.

Cash and cash equivalents - The Company considers deposits with banks or highly liquid short-term interestbearing securities that are readily convertible to known amounts of cash and those that have maturities of three months or less when acquired to be cash equivalents. As of December 31, 2023, the Company had a total of $Nil held in trust classified as cash equivalents (September 30, 2023 – $Nil).

Property and equipment - On initial recognition, property and equipment are valued at cost, being the purchase price and directly attributable cost of acquisition or construction required to bring the asset to the location and condition necessary to be capable of operating in the manner intended by the Company.

Property and equipment are subsequently measured at cost less accumulated depreciation, less any accumulated impairment losses.

The Company utilizes the straight-line basis method of amortization. The amortization rates applicable to each category of property and equipment are as follows:

Machinery and equipment	straight-line basis	6 years
Furniture and fixtures	straight-line basis	7 years
Vehicle	straight-line basis	5 years
Computer	straight-line basis	5 years

Where an item of equipment comprises significant components with different useful lives, the components are accounted for as separate items of equipment. The depreciation method, useful life and residual values are assessed annually. An item of equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising from disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss in the consolidated statements of loss and comprehensive loss.

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3. MATERIAL ACCOUNTING POLICIES (continued)

Impairment of non-financial assets - At each statement of financial position date, in accordance with IAS 36 "Impairment of Assets", the Company assesses whether there is any indication that any of those assets have suffered an impairment loss. If any indication exists, the Company estimates the asset’s recoverable amount.

An impairment loss is recognized when the carrying amount of an asset, or its cash generating unit (“CGU”), exceeds its recoverable amount. Impairment losses are recognized in profit and loss for the reporting period. Impairment losses recognized in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to those units, and then to reduce the carrying amount of other assets in the unit on a pro-rata basis.

An impairment loss for an individual asset or CGU shall be reversed if there has been a change in estimates used to determine the recoverable amount since the last impairment loss was recognized and is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

The recoverable amount is the greater of an assets or CGU 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 risks specific to the asset. For an asset that does not generate largely independent cash inflows, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs.

Exploration and evaluation assets – Once the legal right to explore a property has been acquired, all expenditures related to acquisition, exploration, and evaluation of the properties (“E&E assets”) (including option payments and annual fees to maintain the property in good standing) are capitalized and deferred by property until the project to which they relate is sold, abandoned, impaired, or placed into production. Costs not directly attributable to exploration and evaluation activities are expensed in the period in which they occur. Upon commencement of commercial production, the related accumulated costs are amortized against projected income using the units of production method over estimated recoverable reserves.

Management assesses carrying values of properties for which events and circumstances may indicate possible impairment on an annual basis. Impairment of a property is generally considered to have occurred if (1) the period for which the entity has the right to explore the area has expired or is not expected to be renewed; (2) substantive expenditures on further exploration is neither budgeted nor planned; (3) exploration has not led to discovery of commercially viable quantities; or (4) the carrying amount is unlikely to be recovered in full from successful development or sale. When a project is deemed to no longer have commercially viable prospects to the Company, exploration, and evaluation expenditures in respect of that project are deemed to be impaired. As a result, those exploration and evaluation expenditure costs, more than estimated recoveries, are written down to profit or loss.

Any option payments received by the Company from third parties, or any proceeds received by the Company from the sale of royalties on its properties from third parties are credited to the capitalized cost of the E&E assets. If payments received exceed the capitalized cost of the E&E assets, the excess is recognized as income in the period received.

Restoration and environmental obligations - The Company recognizes liabilities for statutory, contractual, constructive, or legal obligations associated with the retirement of long-term assets, when those obligations result from the acquisition, construction, development, or normal operation of the assets. The net present value of future restoration cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to the related asset along with a corresponding increase in the restoration 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 costs to prevent and control environmental impacts at specific properties are capitalized in accordance with the Company’s accounting policy for exploration and evaluation assets.

As at December 31, 2023, and September 30, 2023, the Company did not have any decommissioning liabilities.

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3. MATERIAL ACCOUNTING POLICIES (continued)

Share capital - The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates the value to the more easily measurable component based on fair value and then the residual value, if any, to the less measurable component. Professional, consulting, regulatory and other costs directly attributable to financing transactions are recorded as deferred share issuance costs until the financing transactions are completed, if the completion of the transaction is considered likely; otherwise, they are expensed as incurred. Share issuance costs are charged to share capital when the related shares are issued. Deferred share issuance costs related to financing transactions that are not completed are charged to expenses.

Finders’ warrants - Warrants issued to agents and brokers in connection with a financing are recorded at fair value using the Black-Scholes option pricing model and charged to share issue costs associated with the offering with an offsetting credit to reserves in shareholders’ equity.

Flow-through shares - Resource expenditure deductions for income tax purposes related to exploration activities funded by flow-through share arrangements are renounced to investors under Canadian income tax legislation. On issuance, the Company separates the flow-through share into i) a flow-through share premium, equal to the difference between the current market price of the Company’s common shares and the issue price of the flowthrough share and ii) share capital. Upon eligible exploration expenditures being incurred, the Company recognizes a deferred tax liability for 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 must be expended on Canadian resource property exploration within a period of two years. Failure to expend such funds after the end of the first year as required under the Canadian income tax legislation will result in a Part XII.6 tax to the Company on flow-through proceeds renounced under the “Look-back” Rule. When applicable, this tax is accrued as flowthrough share tax expense until paid.

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

The Company provides for income taxes using the liability method of tax allocation. Under this method, deferred income tax assets and liabilities are determined based on temporary differences between the accounting and tax bases of existing assets and liabilities and are measured using enacted or substantially enacted tax rates expected to apply when these differences reverse. Deferred income tax assets are recognized to the extent that management has determined it is probable to be realized.

Revenue recognition - The Company may recognize other income from the sale of royalty interests on its wholly owned exploration properties. In these arrangements, the consideration received is based on a pre-determined fixed fee paid up front and is allocated to the performance obligations in the contracts. Fees associated with the purchase that are collected prior to being earned are recorded as deferred revenues. Revenue is recognized as the performance obligations are satisfied.

Share-based payments - The Company records all share-based payments at their fair value. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Sharebased payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured and are recorded at the date the goods or services are received. The corresponding amount is charged to reserves. The Company uses the Black-Scholes option pricing model to estimate the fair value of share-based payments.

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3. MATERIAL ACCOUNTING POLICIES (continued)

Share-based payments (continued)

The share-based payments costs are charged to operations over the stock option vesting period. Agents’ options and warrants issued in connection with common share placements are recorded at their fair value on the date of issue as share issuance costs. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of stock options expected to vest. On the exercise of stock options and agents’ options and warrants, share capital is credited for consideration received and for fair value amounts previously credited to reserves.

Earnings (Loss) per share - The Company uses the treasury stock method in computing earnings (loss) per share. Under this method, basic earnings (loss) per share is computed by dividing earnings (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated by adjusting the weighted average number of common shares outstanding using the treasury stock method, to reflect the potential dilution of securities that could result from the exercise of in-themoney stock options and warrants. Diluted loss per share excludes all dilutive potential equity instruments if their effect is anti-dilutive.

Financial instruments – The Company determines the classification of its financial instruments at initial recognition. The classification and measurement of financial assets after initial recognition at fair value depends on the business model for managing the financial asset and the contractual terms of the cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost at each subsequent reporting period. All other financial assets are measured at their fair values at each subsequent reporting period, with any changes recorded through profit or loss or through other comprehensive income (which designation is made as an irrevocable election at the time of recognition).

After initial recognition at fair value, financial instruments are classified and measured at either:

i. Amortized cost.
ii. FVTPL, if the Company has made an irrevocable election at the time of recognition, or when required (for items such as instruments held for trading or derivatives); or
iii. FVTOCI, when the change in fair value is attributable to changes in the Company’s credit risk.

The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified. Transaction costs that are directly attributable to the acquisition or issuance of a financial asset or financial liability classified as subsequently measured at amortized cost are included in the fair value of the instrument on initial recognition. Transaction costs for financial assets and financial liabilities classified at fair value through profit or loss are expensed in profit or loss.

Impairment

The Company assesses all information available, including on a forward-looking basis the expected credit losses associated with any financial assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. To assess whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition based on all information available, and reasonable and supportable forward-looking information.

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3. MATERIAL ACCOUNTING POLICIES (continued)

Impairment (continued)

Assets carried at amortized cost. If there is objective evidence that an impairment loss on assets carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.

The carrying amount of the asset is then reduced by the amount of the impairment. The amount of the loss is recognized in profit or loss.

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 to the extent that the carrying value of the asset does not exceed what the amortized cost would have been had the impairment not been recognized. Any subsequent reversal of an impairment loss is recognized in profit or loss.

Derecognition of financial assets

The Company derecognizes financial assets only when the contractual rights to cash flow from the financial assets expire, or when it transfers the financial assets and substantially all the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the statements of loss and comprehensive loss.

Financial liability

The Company classifies a liability as current when they do not have an unconditional right to defer settlement for at least 12 months after the reporting date. Otherwise, it is classified as non-current if the Company has the right to defer settlement for at least 12 months after the reporting date.

Further, when a liability includes counterparty conversion option that involves a transfer of the Company’s own equity instruments, the conversion option is recognized as either equity or a liability separately from the host liability under IAS 32 Financial Instruments: Presentation.

Related party transactions - Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or corporate entities. A transaction is a related party transaction when there is a transfer of resources or obligations between related parties.

Leases - At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset over a period in exchange for consideration. The Company assesses whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all the economic benefits from the use of the asset during the term of the contract and it has the right to direct the use of the asset.

The right-of-use asset is subsequently depreciated from the commencement date to the earlier of the end of the lease term, or the end of the useful life of the asset. The right-of-use asset may be reduced due to impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

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3. MATERIAL ACCOUNTING POLICIES (continued)

A lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date discounted by the interest rate implicit in the lease or if that rate cannot be readily determined the incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest method. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments, and amounts expected to be payable at the end of the lease term.

The Company has recognized the right-of-use assets and lease liabilities for long-term leases that have a lease term of 5 years. The lease payments associated with these leases are charged against the lease liability and right-of-use assets is amortized on straight line basis over the period of lease term.

4. AMOUNTS RECEIVABLE

The Company’s amounts receivable for the period ended December 30, 2023, and September 30, 2023, are composed of the following:

composed of the following:
	December	31, 2023	September 30, 2023
GST receivable	$	26,851	$ 34,218
Rent receivable		-	5,250
	$	26,851	$39,468

On April 1, 2023, The Company started renting out a portion of their office space to arm’s length party on a monthto-month basis for a monthly fee of $2,625 inclusive of GST that resulted to a receivable of $Nil as at December 31, 2023 (September 30, 2023 – $5,250). In connection with the private placement closed on October 31, 2023 (Note 10), the Company received $52,500 cash subsequent to the period end December 31, 2023.

5. PREPAID EXPENSES AND DEPOSITS

The Company’s prepaid expenses and deposits for the periods ended December 31, 2023, and September 30, 2023, are composed of the following:

are composed of the following:
December 31, 2023	September 30, 2023
Current Prepaid and Deposits:
Advertising and Promotions $ 25,305 $	35,927
Transfer Agent and filing fees 21,575	8,286
Management and Director fees -	27,727
General office and admin expenses 7,257	11,208
Others -	16,000
$ 54,137 $	99,148

$ 54,137 $	99,148
December 31, 2023	September 30, 2023
Noncurrent Prepaid and Deposits:
Exploration cost $ 170 $	9,726
Rent 23,670	21,000
Reclamation Bond 82,072*	83,217
$ $105,912 $	113,943

*Reclamation bond is on the Company’s Nevada properties. The bond can be refunded upon the faithful performance of the conditions and stipulations as set forth in the bond, the plan of operations and the regulations of the State of Nevada.

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6. RIGHT-OF-USE ASSET AND LEASE LIABILITIES

The lease liability is initially measured at the present value of the lease payments to be made over the lease term, using the effective interest method for the present value determination. As the implicit rate in the lease is 18%, the Company applied the same to calculate the present value of its lease payments.

The Company has entered into lease agreement of its offices for 5 years expiring on November 30, 2027.

Many leases include one or more options to renew. The Company assumes renewals in the determination of the lease term if the renewals are deemed to be reasonably assured at lease commencement date. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The continuity of the right-of-use asset (“ROU asset”) and lease liability for the period ended December 31, 2023, and September 30, 2023, is as follows:

nd September 30, 2023, is as follows:
Right-of-use asset:
Value of right-of-use assets as of September 30, 2022	$	-
Additions		187,303
Depreciation		(31,217)
Value of right-of-use assets as ofSeptember 30,2023	$	156,086
Additions		-
Depreciation		(9,365)
Value of right-of-use assets as of December 31,2023	$	146,721
Lease liability:
Lease liability recognized as of September 30, 2022	$	-
Additions		187,303
Lease payments		(45,470)
Lease interests		23,662
Lease liability recognized as of September 30, 2023	$	165,495
Lease payments		(13,728)
Lease interests		7,354
Lease liability recognized as of December 31, 2023	$	159,121
Current portion		29,357
Long-term portion		129,764
	$	159,121

During the period ended December 31, 2023, the Company did not identify any indicators of impairment (2023 – $Nil).

Following table reflects the undiscounted lease obligations payable during the four years subsequent to the period ended

December 31, 2023:

er 31, 2023:
		2024		2025		2026		2027		Total
Office lease	$	56,420	$	57,430	$	58,441	$	9,768	$	182,058

As of December 31, 2023, the Company recognized right-of-use assets of $146,721 (September 30, 2023 - $156,086) and lease liability of $159,121 in the statement of financial position (September 30, 2023 – $Nil). The rent deposit amount of $21,000 is included in prepaids (September 30, 2023 – $24,000) (Note 5). During the period ended December 31, 2023, the Company expensed $9,921 in variable common area maintenance costs (2022 – $nil).

During the nine months ended December 31, 2023, the company has paid rent of $9,000 for the office premises.

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ACME LITHIUM INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE PERIODS ENDED DECEMBER 31, 2023, AND 2022 (Unaudited – Prepared by Management) (Expressed in Canadian dollars)

7. PROPERTY AND EQUIPMENT

	Machinery
	and	Furniture and
	Equipment	fixtures	Computers	Vehicle	Total
	$	$	$	$	$
Costs:
Balance, September 30, 2022	108,308	22,392	-	68,699	199,399
Additions	374,655	8,939	4,264	-	387,858
Impairment	-	-	-	(10,289)	(10,289)
Balance, September 30, 2023	482,963	31,331	4,264	58,410	576,968
Additions
Disposal	(108,307)	-	-	(58,410)	(166,717)
Balance, December 31, 2023	374,656	31,331	4,264	-	410,251

Accumulated depreciation:
Balance, September 30, 2022	9,026	1,599	-	6,870	17,495
Depreciation	53,175	4,476	853	13,740	72,244
Balance, September 30,2023	62,201	6,075	853	20,610	89,739
Depreciation	11,708	1,119	213	-	13,040
Disposal	(27,076)	-		(20,610)	(47,686)
Balance, December 31, 2023	46,833	7,194	1,066	-	55,093

Net book value:
September 30, 2023	420,762	25,256	3,411	37,800	487,229
December 31, 2023	327,823	24,137	3,198	-	355,158

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ACME LITHIUM INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE PERIODS ENDED DECEMBER 31, 2023, AND 2022

(Unaudited – Prepared by Management) (Expressed in Canadian dollars)

8. EXPLORATION AND EVALUATION ASSETS

The Company’s exploration and evaluation expenditures for the period ended December 31, 2023, are as follows:

	Clayton Valley, Nevada	Fish Lake Valley, Nevada	Euclid Lake Property, Manitoba	Shatford Lake Property	Birse Lake, Manitoba	Bailey Lake, Saskatchewan	Total
	$	$	$	$	$	$	$

Acquisition costs
Balance, September 30, 2023	1,857,328	242,978	36,000	84,000	20,000	150,476	2,390,782
Impairment	-	-	-	-	-	(150,476)	(150,476)
Adjusted Balance, September 30, 2023	1,857,328	242,978	36,000	84,000	20,000	-	2,240,306
Foreign currency translation	(40,389)	(5,284)	-	-	-	-	(45,673)
Balance, December 31, 2023	1,816,939	237,694	36,000	84,000	20,000	-	2,194,633

Exploration and evaluation costs
Balance, September 30, 2023	5,299,781	388,946	392,888	3,489,640	74,280	440,229	10,085,764
Recovery on mineral property		(27,040)	-	-	-	-	(27,040)
Impairment	-	-	-	-	-	(440,229)	(440,229)
Adjusted Balance, September 30, 2023	5,299,781	361,906	392,888	3,489,640	74,280	-	9,618,495
Consulting	-	-	5,625	-	-	-	5,625
Geological surveys	27,437	1,631	-	10,736	-	-	39,804
Travel		456	-	7,500	-	-	7,956
Foreign currency translation	(114,791)	(8,781)	-	-	-	-	(123,572)
Balance, December 31, 2023	5,212,427	355,212	398,513	3,507,876	74,280	-	9,548,308
Funds of earn-in option	-	-	-	(20,000)		-	(20,000)
Total, December 31, 2023	7,029,366	592,906	434,513.00	3,571,876	94,280	-	11,722,941

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ACME LITHIUM INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE PERIODS ENDED DECEMBER 31, 2023, AND 2022

(Unaudited – Prepared by Management) (Expressed in Canadian dollars)

8. EXPLORATION AND EVALUATION ASSETS (continued)

The Company’s exploration and evaluation expenditures for the year ended September 30, 2023, are as follows:

	Clayton Valley, Nevada	Fish Lake Valley, Nevada	Cat-Euclid, Manitoba	Shatford, Manitoba	Birse Lake, Manitoba	Bailey Lake, Saskatchewan	Total
	$ 1,438,543 66,057 371,250 (18,522)	$ 148,065 96,800 - (1,887)	$ 36,000 - - -	$ 84,000 - - -	$ 20,000 - - -	$ - 109,476 41,000 -	$ 1,726,608 272,333 412,250 (20,409)
Acquisition costs
Balance, September 30, 2022
Additions – cash
Additions - common shares
Foreign currency translation
Balance, September 30, 2023	$ 1,857,328	$ 242,978	$ 36,000	$ 84,000	$ 20,000	$ 150,476	$ 2,390,782
	$ 1,242,756 -	$ 139,113 -	$ 313,176 (51,674)	$ 453,733 (97,500)	$ 66,004 -	$ - -	$ 2,214,782 (149,174)
Exploration and evaluation costs
Balance, September 30, 2022
Sale of GOR Royalty
Adjusted Balance, September 30, 2022	$ 1,242,756 4,300 - 2,715,827 1,330,292 13,304 - - (6,698)	$ 139,113 33,345 - - 144,739 - 71,716 1,072 (1,039)	$ 261,502 67,964 - 41,367 22,054 - - - -	$ 356,233 62,339 - 2,682,406 283,973 - 14,724 89,966 -	$ 66,004 - - 2,084 6,192 - - - -	$ - - 41,414 - 398,815 - - - -	2,065,608 167,948 41,414 5,441,684 2,186,065 13,304 86,440 91,038 (7,737)
Consulting
Deficiency deposit
Drilling
Geological surveys
Maintenance fees
Testing and assaying
Travel
Foreign currency translation
Balance, September 30, 2023	$ 5,299,781	$ 388,946	$ 392,887	$ 3,489,641	$ 74,280	440,229	$ 10,085,764
Impairment	- -	- (27,040)	- -	- -	- -	(590,705) -	(590,705) (27,040)
Recovery on mineral property
Total, September 30, 2023	$ 7,157,109	$ 604,884	$ 428,887	$ 3,573,641	$ 94,280	$-	$ 11,858,801

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8. EXPLORATION AND EVALUATION ASSETS (continued)

Clayton Valley, Nevada

On May 12, 2021, the Company entered into an assignment agreement with an arm’s length party to acquire a 100% interest in 119 placer mining claims, comprising the CC, CCP and SX placer lithium claims (the "Project Claims"), located in Clayton Valley, Esmeralda County, Nevada. Under the terms of the agreement, the Company needs to undertake the following to exercise its option: pay cash payments of US$278,500 ($241,564 – US $178,500 paid), issue 5,250,000 common shares (2,250,000 aggregate issued; 750,000 issued in current year with fair value of $371,250), and incur a total of US$2,750,000 in exploration and development expenditures ($2,489,869 – US $1,871,886 incurred). The Company also paid the initial deposit of $6,416 (US$5,000) to reimburse the arm’s length party. The property is subject to a 3.0% Gross Overriding Royalty. The Company has the right to buy back one-half of the royalty for US$1,500,000 for a period of 3 years following the commencement of commercial production.

The following are the terms of the agreement:

	Cash	Common	Exploration
	Payment	Shares	expenditures
	$ (in USD)	#	$ (in USD)
On the Approval Date March 2, 2021 (paid and issued)	78,500	750,000	-
On or before March 2, 2022 (paid and issued)	50,000	750,000	250,000
On or before March 2, 2023 (paid and issued)	50,000	750,000	500,000
On or before March 2, 2024	50,000	1,000,000	1,000,000
On or before March 2, 2025	50,000	2,000,000	1,000,000
Total	278,500	5,250,000	2,750,000

In connection with the option agreement entered with the arm’s length party, the Company is required pay an advance royalty payment of US$200,000 on the 5[th] anniversary of the effective date of the agreement, and continuing each annual anniversary date thereafter, until the property is in production. The cash advances will be credited against future royalty payments due.

FLV Property (Fish Lake Valley, Nevada)

On November 9, 2020, the Company entered into a mineral property purchase and sale agreement (the “FLV agreement”) with an arm’s length party, whereby the Company acquired 81 lode mining claims located in Esmeralda County, Nevada, USA. Under the terms of the FLV agreement, the right, title, and interest in the FLV claims was purchased by paying consideration of $50,000 (paid) and by issuing 100,000 common shares (issued with a fair value of $3,000).

On October 9, 2021, the Company staked 63 new claims (FLV-2) by paying $34,982 (US$ 28,047).

On March 15, 2023, the Company staked 63 new claims (FLV-3) by paying $39,246 (US$28,713).

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8. EXPLORATION AND EVALUATION ASSETS (continued)

On February 6, 2023, the Company entered into a Letter of Intent (the “LOI Agreement”) with an arm’s length party whereby the Purchaser can acquire up to 100% of the 144 FLV mining claims. The Company received $27,040 (US$20,000) as part of the LOI Agreement. On March 20, 2023, the Company received a termination notice from the arm’s length party with regards to the LOI Agreement.

On March 9, 2023, the Company granted a Gross Overriding Royalty of 0.5% on all products mined, produced or otherwise recovered from the FLV property to a third party in accordance with a Master Teaming Agreement entered into during the year.

As at December 31, 2023, the Company holds 207 mineral claims in relation to FLV.

As at December 31, 2023, the FLV claim group has a carrying value of $592,906 (September 30, 2023 – $604,885) which includes $355,212 (September 30, 2023 – $576,342) in exploration expenditures.

Shatford and Cat-Euclid Lake Properties

During the year ended September 30, 2022, the Company entered a term sheet with an arm’s length party for the purchase of royalties in the Cat-Euclid and Shatford lake property. The Company received $833,526 (US$650,000) in cash for the purchase of a 2% gross overriding revenue (GOR) royalty. The proceeds from this transaction were recorded as a reduction to the exploration and evaluation assets. As the proceeds exceeded the capitalized cost of the exploration and evaluation assets of $149,174 as of April 5, 2022, the excess proceeds of $684,352 is recognized as a gain on sale of royalty in the statement of loss and comprehensive loss. .

Birse Lake Property

On September 6, 2022, the Company staked 10 claims located east of Shatford lake. These claims are royaltyfree and not subject to any agreement.

Bailey Lake Property

On December 5, 2022, the Company entered into a purchase agreement to acquire 100% interest in the 5 mineral claims in north central region of Saskatchewan, Canada. The Company paid a consideration of (i) $9,476 on December 7, 2022, and (ii) the grant of a 1% Net Smelter Return Royalty of the gross value of all products derived and shipped from the property.

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8. EXPLORATION AND EVALUATION ASSETS (continued)

On December 6, 2022, the Company entered into an option agreement with an arm’s length party to acquire 100% interest in the 13 mineral claims in Bailey Lake, located in the northeastern region of Saskatchewan, Canada. The Company must pay to the third party an aggregate of $450,000 ($100,000 paid), issue and deliver an aggregate of 450,000 shares (100,000 issued) and incur an aggregate of $1,554,000 of expenditures on the property in accordance with the following schedule:

	Cash	Common	Exploration
	Payment	Shares	expenditures
		#
On or before December 7, 2022 (paid and issued)	$100,000	100,000	$ -
On or before December 5, 2023	150,000	150,000	388,500
On or before date December 5, 2024	200,000	200,000	518,000
On or before December 5, 2025	-	-	647,500
Total	$450,000	450,000	$1,554,000

The property is subject to a 2.0% Net Smelter Return Royalty of the gross value of all products derived and shipped from the property. The Company has the right to buy back one-half of the royalty (1% NSR) for $2,000,000 for a period of 24 months following the commencement of commercial production.

As at December 31, 2023, the Cat Euclid, Shatford and Birse Lake projects have a carrying value of $4,100,669 (September 30, 2023 – $4,096,809) which includes $3,980,669 (September 30, 2023 – $3,956,809) in exploration expenditures.

During the period ended December 31, 2023, the Company decided not to pursue the renewal of their agreement on the claims in Bailey Lake Property in order to focus on other properties. As a result, the Company recognized an impairment loss and wrote off the full balance of $590,705 during the year ended September 30, 2023.

Oregon Properties

On March 23, 2022, the Company staked 340 new mining claims located in southeast Oregon. During the year ended September 30, 2022, expenditures incurred on the property $253,528. However, it decided to focus on other properties and recorded an impairment loss of $253,528 relating to this property during the year ended September 30, 2022.

During the year ended September 30, 2023, the Company has recognized $94,165 (US$69,700) as other income from refund received for maintenance and location relating to this property.

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

For the period ended December 31, 2023 and September 30, 2023, the Company’s accounts payable consist of the following:

the following:
	December 31, 2023	September 30, 2023
Accounts payable	$ 284,014	$ 412,175
Accrued liabilities	124,410	113,885
	$ 408,424	$ 526,060

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10. SHARE CAPITAL

Authorized

The Company has authorized share capital of an unlimited number of common shares and preferred shares without par value. Common and/or preferred shares are entitled to receive dividends when they are declared by the Board of Directors.

Issued and Outstanding Common Shares

As of December 31, 2023, the Company has a total issued and outstanding common shares: 60,972,727 (September 30, 2023 – 59,121,067).

Private Placement Financing and Share Issuances

During the period ended December 31, 2023, the Company had the following capital transactions:

On October 31, 2023, the Company closed a non-brokered private placement financing that was previously announced on September 6, 2023, and issued 1,851,660 units at $0.15 per unit for aggregate gross proceeds of up to $277,749. Each Unit will be comprised of one (1) common share and one-half of one (1/2) transferable common share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share at a price of $0.30 CAD for two (2) years from closing of the Offering. Finder’s fee of $9,100 and 60,666 finder’s warrants exercisable for two years at an exercise price of $0.15, were paid to arm’s lengths parties in connection with the Offering.

During the year ended September 30, 2023, the Company had the following capital transactions:

During the year ended September 30, 2023, 4,775,000 warrants were exercised into common shares at $0.10 per share for total gross proceeds of $477,500.

On December 7, 2022, 100,000 common shares with a fair value of $0.365 were issued as per the mineral property acquisition agreement of Bailey Lake, Saskatchewan (Note 8).

On March 2, 2023, 750,000 common shares with a fair value of $0.495 were issued as per the mineral property acquisition agreement of Clayton Valley, Nevada (Note 8).

Shares held in Escrow

Pursuant to an escrow agreement dated March 25, 2021, (the “ Escrow Agreement”), a total of 3,242,244 common shares held by principals of the Company were placed under escrow of which 2,755,907 common shares were released and 486,337 (September 30, 2023 – 972,673) common shares are still in escrow. The remaining shares held in escrow will be released on April 28, 2024.

11. STOCK OPTIONS

The Company has a stock option plan for directors, officers, employees, and consultants. The aggregate number of shares issuable pursuant to options granted under the plan is limited to 10% of the Company's issued and outstanding common shares at the time the options are granted. The number of shares reserved for issuance to any individual director, officer or consultant shall not exceed 5% of the issued and outstanding common shares. The number of incentive stock options granted to any one consultant, or a person employed to provide investor relations activities in any 12-month period must not exceed 2% of the total issued shares of the Company. The exercise price of each option is determined by the Board.

During the period ended December 31, 2023 and year ended September 30, 2023, the Company did not issue stock options.

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11. STOCK OPTIONS (continued)

As of December 31, 2023, the Company has 3,550,000 incentive stock options outstanding (September 30, 2023 – 3,550,000). A summary of the movements of the stock options is presented below:

Year ended	December 31, 2023	December 31, 2023	September 30, 2023	September 30, 2023
	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price
Outstanding, beginning	3,550,000	$ 1.10	1,325,000	$ 1.10
Granted	-	-	-	-
Outstanding, end	3,550,000	1.10	3,550,000	1.10
Exercisable	3,550,000	$ 1.10	3,550,000	$ 1.10

The following table summarizes information regarding stock options outstanding as of December 31, 2023:

Date issued	Number of options outstanding	Exercise price	Expiration date
July 9, 2021	1,325,000	$ 0.80	July 9, 2026
April 14, 2022	2,000,000	1.28	April 14, 2027
April 28, 2022	225,000	1.30	April 28, 2025
Total options outstanding	3,550,000
Total options exercisable	3,550,000

The weighted average remaining life of the options is 3.13 years (2022 – 4.13 years).

12. WARRANTS

A summary of changes in the Company’s share purchase warrants outstanding for the period ended December 31, 2023 and September 30, 2023 is as follows:

December 31, 2023	December 31, 2023	September 30, 2023	September 30, 2023
Number of warrants	Weighted average exercise price	Number of warrants	Weighted average exercise price
8,256,847	$1.05	13,329,704 - (4,775,000) (297,857)	$ 0.69 - 0.10 0.40
986,496	0.03
-	-
(475,000)	0.06
8,768,343	$0.90	8,256,847	$1.04

Finders’ warrants

On December 16, 2023, 475,000 warrants with exercise prices between $1.20 and $1.50 expired unexercised.

On October 31, 2023, the Company granted 60.666 warrants to finders with an exercise price of $0.15 per share for a period of two years from date of grant. The estimated fair value of the warrants was $36,105, recorded during the period ended December 31, 2023, in connection with the issuance of these warrants. The warrants were fairly valued using Black-Scholes Option Pricing Model with the following assumptions: average risk-free rate – 4.50%; expected life – 2 years; expected volatility – 100%; forfeiture rate – Nil and expected dividends – Nil.

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12. WARRANTS (continued)

The following table summarizes information regarding share purchase warrants outstanding as of December 31, 2023:

Date issued	Number of warrants	Exercise price	Expiry date
June 21, 2021	2,635,883	0.60	June 21, 2025*
July 2, 2021	1,050,575	0.60	June 21, 2025*
March 9, 2022	1,589,750	1.22	March 9, 2024
May 13, 2022	16,204	1.08	May 13, 2024
May 13, 2022	46,667	1.50	May 13, 2024
May 13, 2022	333,334	1.80	May 13, 2024
May 13, 2022	1,597,488	1.40	May 13, 2025
May 19, 2022	16,204	1.08	May 19, 2024
May 19, 2022	46,667	1.50	May 19, 2024
May 19, 2022	115,741	1.40	May 19, 2025
May 19, 2022	333,334	1.80	May 19, 2024
October 31, 2023	986,496	0.30	October 31, 2025
	8,768,343

*On June 9, 2023, the expiry date of the share purchase warrants issued by the Company on June 21, 2021 and July 2, 2021 have been extended for two (2) years to June 21, 2025.

The weighted average exercise price of the warrants as of December 31, 2023, is $0.94, and the weighted average remaining life of the warrants is 1.16 years (September 22, 2023 – $1.04 and 1.27 years, respectively).

Warrants held in escrow.

Pursuant to an escrow agreement dated March 25, 2021, (the “Escrow Agreement”), a total of 1,575,000 warrants held by principals of the Company were placed under escrow. Of that number, As of December 31, 2023, a total of 236,250 remained in escrow.

13. RELATED PARTY TRANSACTIONS

The Company has identified its directors and certain senior officers as its key personnel and the compensation costs for key personnel and companies related to them were recorded at their exchange amounts as agreed upon by transacting parties.

As at December 31, 2023, the Company has $6,471 (September 30, 2023 – $Nil) due to the CFO and Corporate Secretary.

During the periods ended December 31, 2023, and December 31, 2022, the Company entered the following transactions with related parties:

ansactions with relatedparties:
	December 31, 2023	December 31, 2022
Management fees	$ 76,500	$ 72,500
Director fees	11,667	15,000
Accounting fees	16,041	17,007
Total	$ 104,208	$104,507

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13. RELATED PARTY TRANSACTIONS (continued)

(a) Management fees were paid or accrued to the following:

	December 31, 2023	December 31, 2022
Company controlled by the CEO	$ 54,000	$ 50,000
Company controlled by the CFO	22,500	22,500
Total	$ 76,500	$72,500

(b) Accounting fees of $16,041 were paid to a company controlled by the Company’s CFO and Corporate Secretary (2023 – $17,007).
(c) Director fees were paid or accrued to the following:

	December 31, 2023	December 31, 2022
Company controlled by a Director	$ 4,167	$ 7,500
Director	7,500	7,500
Total	$ 11,667	$15,000

14. CAPITAL MANAGEMENT

The Company's capital currently consists of common shares of $16,375,614. The Company's objective when managing capital is to safeguard the entity's ability to continue as a going concern, meet financial obligations, have sufficient capital to achieve and maintain profitable operations and to provide returns for shareholders and benefits for other stakeholders. As at December 31, 2023, the Company had a working capital of $14,375 (September 30, 2023 – working capital deficit $260,400). Management expects to raise additional capital from the capital markets or from private placements of securities.

15. SEGMENT INFORMATION

The Company operates in one business segment, the exploration of mineral properties. The Company conducts its operations in Canada and the USA. Geographic information is as follows:

December 31, 2023	Canada ($)	USA ($)	Total ($)
Total assets	5,111,279	7,678,080	12,789,359
Loss(income)for theperiod	235,813	2,552	238,365

December 31, 2022	Canada ($)	USA ($)	Total ($)
Total assets	10,460,077	4,128,002	14,588,079
Loss for theperiod	321,971	26,535	348,506

16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company is exposed through its operations to the following financial risks:

Market Risk
Credit Risk
Liquidity Risk

In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies, and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

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16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

General Objectives, Policies, and Processes

The Board of Directors has overall responsibility for the determination of the Company’s risk management objectives and policies and, while retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company’s finance function.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility. Further details regarding these policies are set out below.

Fair value of financial instruments

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

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 – Quoted prices in markets that are not active, or inputs that are not observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The fair value of the Company’s financial instruments approximates their carrying value due to their short term to maturity. The fair value of cash is based on level 1 inputs of the fair value hierarchy.

Risk Management

Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices are comprised of four types of risk: foreign currency risk, interest rate risk, commodity price risk and equity price risk.

Foreign Currency Risk

Foreign currency risk is the risk that a variation in exchange rates between the Canadian dollar and United States dollar or other foreign currencies will affect the Company’s operations and financial results. The Company is exposed to currency risk to the extent that monetary assets and liabilities held by the Company are not denominated in Canadian dollars. The Company has not entered any foreign currency contracts to mitigate this risk.

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16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Foreign Currency Risk (continued)

The Company is exposed to currency risk through the following monetary assets and liabilities denominated in foreign currencies:

		December 31, 2023	September 30, 2023
Cash and cash equivalents	USD$	33,760	21,042
Prepaid expense and deposit	USD$	38,100	17,400
Reclamation bond	USD$	63,144	63,144
Accountspayable and accrued liabilities	USD$	126,421	259,872

Based on the above net exposures and if all other variables remain constant, a 10% change in the value of the foreign currency against the Canadian dollar would result in an increase or decrease of $17,162 (September 30, 2023 - $36,146) in loss and comprehensive loss.

Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Financial instruments which are potentially subject to credit risk for the Company consist of cash and cash equivalents. Most of the Company’s cash and cash equivalents are maintained with a federally regulated financial institution with reputable credit and may be redeemed upon demand. The Company considers this risk to be minimal as of December 31, 2023.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The key to success in managing liquidity is the degree of certainty in the cash flow projections. If future cash flows are uncertain, the liquidity risk increases.

The Company’s objective is to ensure that it has sufficient cash on demand to meet expected operational expenses. To achieve this objective, the Company will prepare annual capital expenditure budgets which will be regularly monitored and updated as necessary. The Company monitors its risk of shortage of funds by monitoring the maturity dates of existing trade and other accounts payable.

17. SUPPLEMENTAL CASH FLOW INFORMATION

The Company incurred the following non-cash financing and operating transactions during the period ended December 31, 2023, and 2022.

December 31, 2023, and 2022.
	December 31, 2023	December 31, 2022
	$	$ 41,000 -
Shares issued for exploration and evaluations assets	-
Fair value of warrants issued to finders	2,611

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18. BREAKDOWN OF EXPENSES AND OTHER INCOME (EXPENSES)

	Note	Three months ended	Three months ended
		December 31, 2023	December 31, 2022
Business development
Conference and seminars		$ 1,915	$ 18,037
Corporate development		6,506	66,527
Investor relations		8,155	11,500
Website and marketing		7,350	127,498
Total		$ 23,926	$ 223,562

General and administrative
Depreciation	7	$ 22,405	$ 12,101
Insurance		3,163	3,271
Interest expense	6	7,354	-
Property investigation	8	25,218	34,199
Regulatory and filing fees		18,544	17,450
Rent		13,043	7,736
Office and general		22,235	15,592
Travel		9,707	27,489
Share-based compensation		-	-
Total		$ 121,668	$ 117,838

Professional fees
Accounting and audit fees	13	$ 29,791	$ 17,007
Director fees	13	11,667	15,000
Legal fees		8,919	11,292
Management fees	13	76,500	72,500
Total		$ 126,877	$ 115,799

19. COMMITMENTS

The Company has certain commitments related to key management compensation for $25,500 per month with no specific expiry of terms (Note 13).

The Company has certain commitments in connection with its mineral properties (Note 8).

The Company is bound by management agreement with the CEO according to which, in the event of termination of the agreement, the Company will be liable for the remaining balance of fees and a lump sum equal to six months on his standing management fees including GST, totaling $113,400.

On December 1, 2022, the Company entered into a 5-year lease agreement for its office premises with annual fees of $54,567 beginning in December 2022, with a 1.8% increase each year during the 5-year term.

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20. SUBSEQUENT EVENTS

On January 12, 2024, the Company entered into a property option agreement with Eagle Battery Metals Corp. Pursuant to which, the Company grant the sole and exclusive option to the optionee to acquire all right, title and interest in and to the FLV Property subject to the net smelter returns royalty in consideration for the completion of a series of cash payments, issuance of the payment shares, and the incurring of expenditure toward Mining Operations in respect of the Property. The optionee’s commitments in relation to the option agreement are summarized below:

			Min. Exploration
		Cash	and Development
		Payment	Expenditures	*Shares
Payment	Date of Completion	(USD)	(USD)	(Value, USD)
		$	$	$
	Within 5 days of the effective date, January 12,
First Payment	2024 (received)	50,000	-	-
Second Payment	On or before May 12, 2024	100,000	-	-
Expenditures	On or before January 12, 2025	-	500,000	-
	On the date the optionee completes an initial
	public offering or otherwise becomes listed on
Third Payment	the exchange	450,000	-	675,000
Fourth Payment	On or before 1 year from listing date	375,000	-	1,312,500
Fifth Payment	On or before 2 years from listing date	500,000	-	1,312,500
	On or before the date the Optionee makes a
Resource over 6Mt LCE	public announcement of a measured and/or indicated mineral resource of not less than 6 million tons of lithium carbonate equivalent	500,000	-	3,000,000
	(LCE) on the Property

*Factors in determining the price per share are set forth in the agreement.

On January 29, 2024, the Company entered a property option agreement with Snow Lake Resources LTD. (“Snow Lake”) pursuant to which ACME will grant Snow Lake the option to earn up to 90% undivided interest in the mineral claims held by ACME Lithium at its Manitoba lithium pegmatite project areas, located at southeastern Manitoba, Canada. To exercise this option, Snow Lake should pay a total of $500,000 and incurring a total of $1,800,000 in exploration and development expenditures over the two-year period in accordance with the following schedule:

Date of Completion	Cash Payment	Min. Exploration and Development Expenditures	Earn in
	$	$
Initial Payment	20,000 (received)	-
Upon Execution	130,000 (received)	-
First Year	150,000	600,000	51%
Second Year	200,000	1,200,000	90%

On February 22, 2024, the Company announced a non-brokered private placement financing of up to 14,000,000 units (the “Units”) of securities at a price of $0.05 per Unit for aggregate gross proceeds of up to $700,000. Each Unit will be comprised of one common share and one transferable common share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share at a price of $0.10 for three years from closing of the private placement.

AI assistant

Surface Metals Inc. — Interim / Quarterly Report 2024

47518_rns_2024-02-28_be89f942-0ba9-4293-9f21-ea9b1f45922d.pdf

ACME LITHIUM INC.

Notice of No Auditor Review of Interim Condensed Financial Statements

APPROVED ON BEHALF OF THE BOARD OF DIRECTORS ON February 27, 2024

ACME LITHIUM INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE PERIODS ENDED DECEMBER 31, 2023 AND 2022

ACME LITHIUM INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE PERIODS ENDED DECEMBER 31, 2023 AND 2022

ACME LITHIUM INC. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED DECEMBER 31, 2023 AND 2022

1. NATURE AND CONTINUANCE OF OPERATIONS

Background

Going concern

1. NATURE AND CONTINUANCE OF OPERATIONS (continued)

2. BASIS OF PREPARATION

b) Basis of Measurement

c) Basis of Consolidation

d) Presentation and Functional Currency

2. BASIS OF PREPARATION (continued)

3. MATERIAL ACCOUNTING POLICIES

Critical Judgments

Estimates

3. MATERIAL ACCOUNTING POLICIES (continued)

Estimates (continued)

3. MATERIAL ACCOUNTING POLICIES (continued)

3. MATERIAL ACCOUNTING POLICIES (continued)

3. MATERIAL ACCOUNTING POLICIES (continued)

Share-based payments (continued)

Impairment

3. MATERIAL ACCOUNTING POLICIES (continued)

Impairment (continued)

Derecognition of financial assets

Financial liability

3. MATERIAL ACCOUNTING POLICIES (continued)

4. AMOUNTS RECEIVABLE

5. PREPAID EXPENSES AND DEPOSITS

6. RIGHT-OF-USE ASSET AND LEASE LIABILITIES

ACME LITHIUM INC.

7. PROPERTY AND EQUIPMENT

ACME LITHIUM INC.

8. EXPLORATION AND EVALUATION ASSETS

ACME LITHIUM INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE PERIODS ENDED DECEMBER 31, 2023, AND 2022

8. EXPLORATION AND EVALUATION ASSETS (continued)

8. EXPLORATION AND EVALUATION ASSETS (continued)

Clayton Valley, Nevada

FLV Property (Fish Lake Valley, Nevada)

8. EXPLORATION AND EVALUATION ASSETS (continued)

Shatford and Cat-Euclid Lake Properties

Birse Lake Property

Bailey Lake Property

8. EXPLORATION AND EVALUATION ASSETS (continued)

Oregon Properties

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

10. SHARE CAPITAL

Authorized

Private Placement Financing and Share Issuances

Shares held in Escrow

11. STOCK OPTIONS

11. STOCK OPTIONS (continued)

12. WARRANTS

Finders’ warrants

12. WARRANTS (continued)

Warrants held in escrow.

13. RELATED PARTY TRANSACTIONS

13. RELATED PARTY TRANSACTIONS (continued)

14. CAPITAL MANAGEMENT

15. SEGMENT INFORMATION

16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

General Objectives, Policies, and Processes

Fair value of financial instruments

Risk Management

Market Risk

Foreign Currency Risk

16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Foreign Currency Risk (continued)

Credit Risk

Liquidity Risk

Surface Metals Inc. Interim / Quarterly Report 2024