Tower Resources Ltd. — Interim / Quarterly Report 2023

Apr 4, 2023

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CONDENSED INTERIM FINANCIAL STATEMENTS

For the Three Months Ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

TOWER RESOURCES LTD. INDEX TO CONDENSED INTERIM FINANCIAL STATEMENTS (Expressed in Canadian Dollars)

PAGE(S)

CONTENTS
NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM FINANCIAL STATEMENTS	3
CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION	4
CONDENSED INTERIM STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)	5
CONDENSED INTERIM STATEMENTS OF CASH FLOWS	6
CONDENSED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY	7
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS	8 - 19

Page 2

NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed interim financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements.

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

The accompanying condensed interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

Page 3

TOWER RESOURCES LTD. CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars - Unaudited)

	January 31,	October 31,
	2023	2022
	$	$
ASSETS
Current
Cash	1,542,223	1,369,904
Receivables (Note 4)	16,930	24,470
Marketable securities (Note 5)	39,157	5,938
Prepaid expenses and deposits	12,669	19,340
	1,610,979	1,419,652
Equipment(Note 6)	1,148	1,208
Exploration and evaluation assets(Note 7)	6,694,137	6,614,323
Reclamation bonds(Note 8)	80,000	80,000
	8,386,264	8,115,183
LIABILITIES
Current
Accounts payable and accrued liabilities (Notes 9 and 11)	92,274	434,625
Flow-through share premium (Note 10)	233,118	-
	325,392	434,625
SHAREHOLDERS’ EQUITY
Share capital (Note 10)	21,781,087	21,339,369
Reserves (Note 10)	997,033	926,166
Deficit	(14,717,248)	(14,584,977)
	8,060,872	7,680,558
	**8,386,264 **	8,115,183

NATURE OF OPERATIONS AND GOING CONCERN (Note 1) SUBSEQUENT EVENT (Note 16)

Approved and authorized on behalf of the Board:

s/“Joe Dhami” Joe Dhami, Director	/s/“Gerald Shields” Gerald Shields, Director

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

Page 4

TOWER RESOURCES LTD.

CONDENSED INTERIM STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS ) (Expressed in Canadian Dollars - Unaudited)

Expenses Accounting and audit fees (Note 11) Depreciation (Note 6) Investor relations Management fees (Note 11) Office and miscellaneous Share-based compensation (Notes 10 and 11) Transfer agent and filing fees Interest income Recognition of flow-through premium (Note 10) Recovery on exploration and evaluation assets previously written off (Note 7) Unrealized loss on marketable securities (Note 5) Income (loss) and comprehensive income (loss) for the period	For the three months ended January 31,	For the three months ended January 31,
	2023 $ 7,500 60 13,000 27,500 24,003 90,368 3,889 (166,320) 615 215 35,000 (1,781) (132,271)	2022
		$ 7,100 76 - 22,500 21,880 22,257 3,716
		(77,529) 62 100,771 - (10,500)
		12,804
Basic and diluted income (loss) per share	(0.00)	0.00
Weighted average number of common shares outstanding –basic and diluted	139,892,850	130,062,733

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

Page 5

TOWER RESOURCES LTD. CONDENSED INTERIM STATEMENTS OF CASH FLOWS

(Expressed in Canadian Dollars - Unaudited)

Cash flows used in operating activities Income (loss) for the period Items not affecting cash Depreciation Share-based compensation Recognition of flow-through premium Recovery on exploration and evaluation assets previously written off Unrealized loss on marketable securities Changes in non-cash working capital items Receivables Prepaid expenses and deposits Accounts payable and accrued liabilities Cash flows used in investing activity Acquisition of exploration and evaluation assets Cash flows provided by financing activities Proceeds from shares issued Proceeds from warrants exercised Proceeds from options exercised Share issuance costs Net change in cash Cash, beginning of period Cash, end of period	For the three months ended January 31,	For the three months ended January 31,
	2023 $ (132,271) 60 90,368 (215) (35,000) 1,781 7,540 6,671 (15,151) (76,217) (407,014) (407,014) 700,000 - 2,500 (46,950) 655,550 172,319 1,369,904 1,542,223	2022
		$ 12,804 76 22,257 (100,771) - 10,500 (3,084) 2,314 (13,566)
		(69,470)
		(328,173)
		(328,173)
		- 100,000 - -
		100,000
		(297,643) 1,714,714
		1,417,071

SUPPLEMENTAL CASH FLOW INFORMATION (Note 13)

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

Page 6

TOWER RESOURCES LTD. CONDENSED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Expressed in Canadian Dollars - Unaudited)

Balance at October 31, 2021 Shares issued for warrants exercised Share-based compensation Net income for the period Balance at January 31, 2022 Shares issued for options exercised Shares issued for warrants exercised Shares issued for exploration and evaluation assets Share-based compensation Stock options expired Warrants expired Loss for the period Balance at October 31, 2022 Shares issued for cash Shares issued for options exercised Share issuance costs Flow-through premium Share-based compensation Warrants expired Loss for the period Balance at January 31, 2023	Number of Shares Issued 129,867,081 1,000,000 - -	Capital Stock $ 20,154,705 100,000 - -	Reserves $ 715,755 - 22,257 -	Deficit $ (14,254,815) - - 12,804	Total Shareholders' Equity
					$ 6,615,645 100,000 22,257 12,804
	130,867,081 441,667 6,657,502 200,000 - - - -	20,254,705 85,822 810,336 29,000 - - 159,506 -	738,012 (41,197) (39,805) - 451,233 (22,571) (159,506) -	(14,242,011) - - - - 22,571 - (365,537)	6,750,706 44,625 770,531 29,000 451,233 - - (365,537)
	138,166,250 3,888,889 41,666 - - - - -	21,339,369 700,000 4,591 (62,263) (233,333) - 32,723 -	926,166 - (2,091) 15,313 - 90,368 (32,723) -	(14,584,977) - - - - - - (132,271)	7,680,558 700,000 2,500 (46,950) (233,333) 90,368 - (132,271)
	142,096,805	21,781,087	997,033	(14,717,248)	8,060,872

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

Page 7

TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

1. NATURE OF OPERATIONS AND GOING CONCERN

Nature of operations

Tower Resources Ltd. (the “Company”) is incorporated under the laws of British Columbia, Canada. The Company’s common shares are listed for trading on the TSX Venture Exchange ("TSX-V") under the symbol TWR. The Company’s head office and principal address and registered and records office is located at 40440 Thunderbird Ridge B1831, Garibaldi Highlands, BC, V0N 1T0.

Going concern

The Company’s principal business activity is the acquisition and exploration of mineral exploration and evaluation assets domiciled in Canada. The Company has not yet determined whether any of these exploration and evaluation assets contain ore reserves that are economically recoverable. The recoverability of the amounts shown for exploration and evaluation assets is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of those reserves and future profitable production. To date, the Company has not earned any revenues and is considered to be in the exploration stage.

These condensed interim financial statements have been prepared assuming the Company will continue on a going concern basis. The Company has incurred losses since inception, and the ability of the Company to continue as a going concern depends upon its ability to raise adequate financing and/or to achieve profitable operations. These condensed interim financial statements do not include adjustments to the carrying value of assets and liabilities, the reported expenses, and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

The continuation of the Company’s operations is dependent on obtaining sufficient additional financing in order to realize the recoverability of the Company’s investments in exploration and evaluation assets, which in turn is dependent upon the existence of economically recoverable reserves and market prices for the underlying minerals. Management closely monitors commodity prices of precious metals, individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company if favourable or adverse market conditions occur. The Company raised capital in the current, prior, and subsequent (Note 16) periods through private placements of its common shares and exercise of options and warrants, with the result that the current working capital balance is an amount that management estimates is sufficient to further operations for the upcoming twelve months.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. In addition, in February 2022, Russia invaded Ukraine. This has created additional global supply chain issues, market instability and volatility, and increased inflation. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak nor the Russian invasion and their effects on the Company’s business or results of operations or its ability to raise funds.

2. BASIS OF PRESENTATION

Statement of compliance

These condensed interim financial statements, including comparatives, have been prepared in accordance with IAS 34, Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB") and the interpretations of the International Financial Reporting Interpretations Committee. They do not include all disclosures required by International Financial Reporting Standards ("IFRS") for annual financial statements, and, therefore, should be read in conjunction with the Company’s audited financial statements for the year ended October 31, 2022, prepared in accordance with IFRS as issued by the IASB.

Page 8

TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

2. BASIS OF PRESENTATION (continued)

Statement of compliance (continued)

These condensed interim financial statements were approved by the Audit Committee and Board of Directors of the Company on April 3, 2023.

Basis of presentation

These condensed interim financial statements have been prepared on a historical cost basis, using the accrual basis of accounting, except for cash flow information and certain financial assets that are measured at fair value.

Functional currency

The functional currency of an entity is the currency of the primary economic environment in which the entity operates. The functional currency of the Company is the Canadian dollar. The reporting currency of the Company is the Canadian dollar.

Significant estimates

The preparation of these condensed interim financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of these condensed interim financial statements and the reported revenues and expenses during the period.

Although management uses historical experience and its best knowledge of the amounts, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates.

Critical judgment exercised relates primarily to the application of the going concern basis of preparation.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in material adjustments are as follows:

Economic recoverability and probability of future economic benefits of exploration and evaluation assets

Management has determined that exploration, evaluation, and related costs incurred which were capitalized may have future economic benefits and may be economically recoverable. Management uses several criteria in its assessment of economic recoverability and probability of future economic benefits, including geologic and other technical information, a history of conversion of mineral deposits with similar characteristics to its own properties to proven and probable mineral reserves, the quality and capacity of existing infrastructure facilities, evaluation of permitting and environmental issues and local support for the project.

Valuation of share-based compensation

The Company uses the Black-Scholes option pricing model for valuation of share-based compensation. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate, and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity reserves.

Significant judgments

Going concern

The Company has exercised judgment in determining that its available funds are sufficient to continue operations for the ensuing twelve months.

Page 9

TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

3. SIGNIFICANT ACCOUNTING POLICIES

These condensed interim financial statements were prepared using the same accounting policies and methods of computation as in the Company’s financial statements for the year ended October 31, 2022.

New standards, interpretations and amendments to existing standards not yet effective

A number of new standards and amendments to standards and interpretations have been issued by the IASB and are effective for annual periods beginning after November 1, 2022. These have not been applied in preparing these condensed interim financial statements. There are no IFRSs or IFRS Interpretations Committee interpretations that are not yet effective that would be expected to have a material impact on these condensed interim financial statements.

4. RECEIVABLES

	January 31,	October 31,
	2023	2022
	$	$
GST receivable	15,754	23,909
Interest receivable	1,176	561
	16,930	24,470

5. MARKETABLE SECURITIES

As at January 31, 2023, the Company held 1,118,750 (October 31, 2022 - 118,750) common shares of Volatus Capital Corp. (“Volatus”), with a fair value of $39,157 (October 31, 2022 - $5,938). During the three months ended January 31, 2023, the Company received 1,000,000 (January 31, 2022 - nil) common shares of Volatus, with a fair value of $35,000 (January 31, 2022 - $nil), pursuant to option agreements on the Belle and More Creek properties (Note 7). The change in market value of the shares resulted in the recording of an unrealized loss on marketable securities for the three months ended January 31, 2023 of $1,781 (January 31, 2022 - $10,500).

Page 10

TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

6. EQUIPMENT

	Computer software	Equipment and furniture Total
Cost October 31, 2021 and 2022 and January 31, 2023	$ 76,929	$ $ 11,451 88,380
Depreciation October 31, 2021 Charge for the year	76,929 -	9,941 86,870 302 302
October 31, 2022 Charge for the period	76,929 -	10,243 87,172 60 60
January 31, 2023	76,929	10,303 87,232
Net book value October 31, 2022	-	1,208 1,208
January 31, 2023	-	1,148 1,148

Page 11

TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

7. EXPLORATION AND EVALUATION ASSETS

	Belle Rabbit North Nechako Gold More Creek Total
Balance, October 31, 2021 Acquisition costs Deferred costs Drilling Equipment rental Field travel, meals and accommodation Geology Laboratory and analytical Project supplies and fuel Additions for the year B.C. mineral exploration tax credit recovery Balance, October 31, 2022 Acquisition costs Deferred costs Consulting Equipment rental Field travel, meals, and accommodations Geology Laboratory and analytical Project supplies and fuel Additions for the period Balance, January 31, 2023	$ $ $ $ $
	1 2,760,354 2,484,315 - 5,244,670 - 79,000 - - 79,000 - 761,031 - - 761,031 - 1,953 - - 1,953 - 80,929 - - 80,929 - 312,764 6,370 - 319,134 - 110,664 691 - 111,355 - 23,688 - - 23,688
	- 1,370,029 7,061 - 1,377,090 - - (7,437) - (7,437)
	1 4,130,383 2,483,939 - 6,614,323 - - - - - - 4,500 - - 4,500 - 360 - - 360 - 6,006 - - 6,006 - 17,836 - - 17,836 - 45,436 49 - 45,485 - 5,627 - - 5,627
	- 79,765 49 - 79,814
	1 4,210,148 2,483,988 - 6,694,137

Page 12

TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

7. EXPLORATION AND EVALUATION ASSETS (continued)

BELLE PROPERTY

The Company owns a 100% interest in the Belle property located in the Omineca mining division of British Columbia. The property is subject to a 2% net smelter return royalty (“NSR”), of which 1% can be purchased by the Company for $2,000,000.

On August 5, 2020, the Company entered into an option agreement with Volatus, pursuant to which the Company granted to Volatus the option to acquire its 100% interests in and to the Belle property (the “Belle Option”). To exercise the Belle Option and earn a 100% interest, Volatus is required to make a total of $100,000 in cash payments ($75,000 received as at January 31, 2023) and issue 125,000 common shares over a 36 month period (93,750 received as at January 31, 2023, valued at $63,125).

RABBIT NORTH PROPERTY

The Company owns a 100% interest in the Rabbit North property, comprised of certain mineral claims, located in the Kamloops mining division of British Columbia. The Company acquired the property by making cash payments of $170,000, issuing 1,300,000 common shares, and funding aggregate exploration expenditures of $2,150,000.

The property is subject to a 3% NSR in favour of the optionors, of which 1% of the 3% may be purchased by the Company for $2,000,000 and the second 1% of the 3% may be purchased by the Company for $1,500,000. In March 2017, the Company entered into a royalty buyback assignment agreement with Sandstorm Gold Ltd. (“Sandstorm”) pursuant to which it assigned to Sandstorm the Company’s right to purchase the second 1% of the Company’s 2% buyback rights with respect to the optionors’ NSR. If the Company makes a decision to develop the Rabbit North property and put it into production, the Company has agreed to exercise its right to buy back 1% of the NSR, contingent upon Sandstorm exercising its right to buy back the second 1% (as assigned to it), whereupon the Company will grant directly to Sandstorm a 1% NSR. As at January 31, 2023, the Company had paid a total of $150,000 in advance annual royalty payments.

The Company acquired additional claims contiguous to the Rabbit North property by staking, known collectively as the Rabbit North Extension property. In March 2017, the Company entered into an agreement with Sandstorm and granted Sandstorm a 2% NSR on the Rabbit North Extension property. The Company has the option to buy back 1% of the NSR from Sandstorm for cash consideration of $500,000.

In fiscal 2022, the Company entered into a property purchase agreement and acquired a 100% interest in the West Afton Property, comprised of certain mineral claims contiguous to the Rabbit North property, by making cash payments totaling $20,000 and issuing 200,000 common shares, valued at $29,000.

NECHAKO GOLD PROPERTY

In July 2016, the Company entered into two property option agreements (Porphyry and Chutanli) under which it was granted the right to acquire mineral tenures in the Nechako Plateau region of central British Columbia. The Company fully exercised the options and now owns a 100% interest in these property properties. Details are as follows:

Porphyry Property Option Agreement

In fiscal 2018, the Company fulfilled its obligations under the Porphyry Property option agreement and earned the right to acquire a 100% interest in the Porphyry Property by making cash payments totaling $40,000 and issuing 400,000 common shares, in addition to funding aggregate exploration expenditures of $250,000.

The agreement is subject to a 1.5% NSR, which can be purchased by the Company for $1,000,000.

Page 13

TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

7. EXPLORATION AND EVALUATION ASSETS (continued)

NECHAKO GOLD PROPERTY (continued)

Chutanli Property Option Agreement

In fiscal 2019, the Company fulfilled its obligations under the Chutanli Property option agreement and earned the right to acquire a 100% interest in the Chutanli Property by making cash payments totaling $60,000 and issuing 600,000 common shares, in addition to funding aggregate exploration expenditures of $225,000.

The agreement is subject to a 1.5% NSR, which can be purchased by the Company for $1,000,000.

In March 2017, the Company entered into certain NSR agreements with Sandstorm and granted Sandstorm a 2% NSR on the Nechako Gold property. The Company has the option to buy back 1% of the NSR from Sandstorm for cash consideration of $500,000.

MORE CREEK PROPERTY

This property is located in the Golden Triangle district of northwest British Columbia and was acquired by staking.

In March 2017, the Company entered into an NSR agreement with Sandstorm and granted Sandstorm a 2% NSR on the Company’s More Creek property. The Company has the option to buy back 1% of the NSR from Sandstorm for cash consideration of $500,000.

On August 21, 2020, the Company entered into an option agreement with Volatus, pursuant to which the Company granted to Volatus the right to acquire its 100% interest in and to the More Creek property (the “More Option”). To exercise the More Option and earn a 100% interest, Volatus is required to make a total of $150,000 in payments (of which Volatus must pay $50,000 in cash and, at its option, pay up to $100,000 in cash or shares of Volatus) ($50,000 cash received and 1,000,000 shares received in lieu of $50,000 cash as at January 31, 2023), issue 25,000 common shares (received, valued at $39,000), and complete $600,000 in exploration expenditures over a 40‐month period. The Company will retain a 1% NSR of which 0.5% can be repurchased by Volatus for $500,000. During the three months ended January 31, 2023, the Company recorded an amount for the More Option of $35,000 (2022 - $nil), in recovery on exploration and evaluation assets previously written off.

8. RECLAMATION BONDS

In relation to the Rabbit North and Nechako properties, the Company has posted reclamation bonds totaling $45,000 and $35,000 as at January 31, 2023 (October 31, 2022 - $45,000 and $35,000), respectively.

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	January 31,	October 31,
	2023	2022
	$	$
Accounts payable	64,274	406,625
Accrued liabilities	28,000	28,000
	92,274	434,625

Page 14

TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

10. SHARE CAPITAL AND RESERVES

Authorized share capital

Unlimited number of common shares without par value.

Issued share capital

During the three months ended January 31, 2023, the Company issued:

• a. 3,888,889 units at a price of $0.18 per unit for gross proceeds of $700,000. Each unit was comprised of one flow-through common share and one share purchase warrant, with each warrant entitling the holder to acquire one additional common share of the Company at an exercise price of $0.36 per share for a period of 24 months. The Company paid a total of $46,950 in cash for fees and issued 233,333 finder’s warrants. Each finder’s warrant entitles the to acquire one additional common share of the Company at an exercise price of $0.18 per share for a period of 24 months. The finder’s warrants were valued at $15,313, calculated using the Black-Scholes option pricing model assuming a life expectancy of two years, a risk-free interest rate of 3.93%, a dividend rate of nil%, a forfeiture rate of nil% and volatility of 122%. The flow-through shares were issued at a premium of $233,333; and

• b. 41,666 common shares for proceeds of $2,500 pursuant to the exercise of options.

During the year ended October 31, 2022, the Company issued:

• a. 200,000 common shares, valued at $29,000, pursuant to the acquisition of the West Afton Property (Note 7);

• b. 441,667 common shares for proceeds of $44,625 pursuant to the exercise of options; and

• c. 7,657,502 common shares for proceeds of $870,531 pursuant to the exercise of warrants.

Flow-through share premium

	Total
	$
October 31, 2021	394,106
Recognition of flow-through premium	(394,106)
October 31, 2022	-
Flow-through premium additions	233,333
Recognition of flow-through premium	(215)
January 31, 2023	233,118

As at January 31, 2023, the Company was obligated to incur $699,355 in eligible exploration expenditures by December 31, 2023.

Stock options

On November 19, 2010, the Company adopted an incentive stock option plan (the “Plan”). The Plan provides that the aggregate number of shares of the Company’s capital stock issuable pursuant to options granted under the Plan may not exceed ten percent of the issued and outstanding common shares of the Company at the time an option is granted. Options granted under the Plan will have a maximum term of 10 years. The exercise price of options granted under the Plan shall be set by the Board of Directors on the effective date of the options and will not be less than the Discounted Market Price as defined under the policies of the TSX-V. Vesting of the options shall be at the discretion of the Board of Directors.

During the three months ended January 31, 2023, the Company expensed $90,368 (2022 - $22,257) as share-based compensation as share-based compensation for the fair value of vesting stock options.

Page 15

TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

10. SHARE CAPITAL AND RESERVES (continued)

Stock options (continued)

During the year ended October 31, 2022, the Company granted 2,818,000 incentive stock options with a fair value of $681,445 using the Black-Scholes option pricing model. During the year ended October 31, 2022, the Company expensed $473,490 as share-based compensation for the fair value of vesting stock options.

During the three months ended January 31, 2023, 41,666 (2022 - nil) incentive stock options were exercised; accordingly, fair value associated with the options of $2,091 (2022 - $nil) was reclassified from reserves to share capital.

During the year ended October 31, 2022, 150,000 incentive stock options expired unexercised; accordingly, fair value associated with the options of $22,571 was reversed from reserves to deficit.

The following is a summary of stock options activities:

Outstanding at October 31, 2021 Granted Exercised Expired Outstanding at October 31, 2022 Exercised Outstanding at January 31, 2023	Number of options 7,750,000 2,818,000 (441,667) (150,000) 9,976,333 (41,666) 9,934,667	Weighted average exerciseprice
		$ 0.08 0.28 0.10 0.16 0.13 0.06 0.13

The Company has outstanding options entitling the holders to purchase common shares at January 31, 2023 as follows:

Number outstanding 500,000 2,700,000 1,850,000 2,066,667 2,818,000 9,934,667	Number exercisable Exercise price $ 500,000 0.125 2,700,000 0.055 1,850,000 0.115 1,350,000 0.060 939,333 0.280 7,339,333	Weighted average remaining life(years) 0.25 1.49 2.47 3.74 4.26	Expiry date
			May 2, 2023 July 29, 2024 July 22, 2025 October 26, 2026 May 4, 2027

The weighted average exercise price of exercisable options is $0.10.

Page 16

TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

10. SHARE CAPITAL AND RESERVES (continued)

Warrants

During the year ended October 31, 2022, 25,985,440 (2021 - 5,387,500) share purchase warrants expired unexercised accordingly, $159,506 (2021 - $nil) was reversed from reserves to share capital.

The following is a summary of share purchase warrant activities:

Outstanding at October 31, 2021 Expired Exercised Outstanding at October 31, 2022 Issued Expired Outstanding at January 31, 2023	Number of warrants 34,205,442 (25,985,440) (7,657,502) 562,500 4,122,222 (250,000) 4,434,722	Weighted average exerciseprice
		$ 0.19 0.22 0.11 0.12 0.35 0.22 0.33

The Company has outstanding warrants entitling the holders to purchase common shares at January 31, 2023 as follows:

Number outstanding 312,500 3,888,889 233,333 4,434,722	Exercise price $ 0.0375 0.36 0.18	Expiry date
		December 31, 2023 December 23, 2024 December 23, 2024

11. RELATED PARTY TRANSACTIONS

The Company entered into transactions with related parties during the three months ended January 31, 2023 and 2022.

Summary of key management personnel compensation (includes officers and directors of the Company):

	For the three months	ended
	January 31,
	2023	2022
	$	$
Accounting fees	7,500	6,000
Management fees	27,500	22,500
Share-based compensation	65,674	19,260
	100,674	47,760

Amounts owing to related parties (including key management personnel) included in accounts payable and accrued liabilities total $13,388 as at January 31, 2023 (October 31, 2022 - $9,975).

Page 17

TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

12. SEGMENTED INFORMATION

The Company has one geographic segment, being Canada, and one operating segment, being the acquisition and exploration of mineral exploration and evaluation assets.

13. SUPPLEMENTAL CASH FLOW INFORMATION

The significant non-cash investing and financing transactions are as follows:

	For the three months ended	For the three months ended
	January 31,
	2023	2022
	$	$
Non-cash transactions not included in investing or financing activities:
Exploration and evaluation assets in accounts payable	35,226	38,419
Shares received for exploration and evaluation assets	35,000	-
Options exercised	2,091	-
Fair value of agent’s warrants	15,313	-
Warrants expired	32,723	-
Flow-through share premium	233,333	-

14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

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

• Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

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

The Company’s financial instruments consist of cash, receivables, marketable securities, reclamation bonds, and accounts payable and accrued liabilities. The fair value of these financial instruments approximates their carrying values, except for marketable securities, which are measured at fair value using level 1 inputs.

The Company is exposed to a variety of financial risks by virtue of its activities including credit, liquidity, interest rate, foreign currency and price risk.

Credit risk

The Company is exposed to industry credit risks arising from its cash holdings and receivables. The Company manages credit risk by placing cash with major Canadian financial institutions. The Company’s receivables are primarily due from a government agency. Management believes that credit risk related to these amounts is nominal.

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TOWER RESOURCES LTD. Notes to the condensed interim financial statements For the three months ended January 31, 2023 (Expressed in Canadian Dollars - Unaudited)

14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient funds to meet its financial obligations when they are due. To manage liquidity risk, the Company reviews additional sources of capital and financing to continue its operations and discharge its commitments. The Company has sufficient cash as at January 31, 2023 to settle its current liabilities as they come due and management estimates funds are sufficient to further operations for the upcoming twelve months (Note 1).

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As of January 31, 2023, the Company held deposits with a face value of $68,000. A 1% increase or decrease in the interest rates would have a nominal impact in interest income for the three months January 31, 2023.

Foreign currency risk

The Company is not significantly exposed to foreign currency risk on fluctuations related to items that are denominated in a foreign currency.

Price risk

The Company has limited exposure to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact on the Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities.

15. CAPITAL MANAGEMENT

The Company manages its capital structure and makes adjustments to it based on the funds available to the Company, in order to support the acquisition and exploration of exploration and evaluation assets. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company defines capital that it manages as share capital, options and warrants.

The properties in which the Company currently has an interest are in the exploration stage; as such the Company has historically relied on the equity markets to fund its activities. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The Company is not subject to externally imposed capital restrictions. There have been no significant changes in the Company’s objectives, policies, and processes for managing its capital during for the three months ended January 31, 2023.

16. SUBSEQUENT EVENT

Subsequent to January 31, 2023, the Company issued 50,000 common shares pursuant to the exercise of options, for proceeds of $14,000.

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