Vortex Metals Inc. — Annual Report 2021

Apr 29, 2022

Consolidated Financial Statements

Victory Capital Corp.

For the Years Ended December 31, 2021 and 2020

(Stated in Canadian Dollars)

INDEX
Independent Auditor’s Report	1-2
Consolidated Statements of Financial Position	3
Consolidated Statements of Loss and Comprehensive Loss	4
Consolidated Statements of Changes in Equity	5
Consolidated Statements of Cash Flow	6
Notes to the Consolidated Financial Statements	7 - 21

Independent Auditor's Report

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To the Shareholders of Victory Capital Corporation:

Opinion

We have audited the consolidated financial statements of Victory Capital Corporation (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2021 and December 31, 2020, and the consolidated statements of loss and other comprehensive loss, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2021 and December 31, 2020, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. The other information comprises Management’s Discussion and Analysis.

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

In connection with our audits of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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

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

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

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

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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

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

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

Vancouver, British Columbia

April 29, 2022

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Chartered Professional Accountants

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Victory Capital Corp. Consolidated Statements of Financial Position For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

Victory Capital Corp. Consolidated Statements ofFinancialPosition For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars
	2021 2020
Assets Current Assets Cash Funds held in trust (notes 5 and 12) Loan receivables (note 11) Liabilities Current Liabilities Accounts payable and accrued liabilities Other payables (note 5) Shareholders' Equity Issued Capital(note 4) Subscribed Shares(notes 5 and 12) Contributed Surplus(note 6) Deficit	$ 264,092 $ 426,284 289,000 - 128,583 15,045
	$ 681,675 $ 441,329
	$ 424,304 $ 33,631 110,010 -
	534,314 33,631 755,488 767,579 258,535 - 147,903 80,877 (1,014,565) (440,758)
	147,361 407,698
	$ 681,675 $ 441,329

Nature of operations (note 1)

Subsequent events (note 12)

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

Approved on Behalf of the Board

Signed "Roger (Zelong) He", Director Signed "Raj Dewan", Director

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Victory Capital Corp.

Consolidated Statements of Loss and Comprehensive Loss For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

Victory Capital Corp. Consolidated Statements ofLoss and Comprehensive Loss For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars
	2021 2020
Expenses Bank charges Consulting fees Filing fees Professional fees Share-based compensation (note 6) Other Expenses (Income) Interest income Net loss and comprehensive loss for the year Loss per Share - basic and diluted Weighted Average Number of Common Shares Outstanding - basic and diluted	567 134 85,800 21,450 25,164 14,038 410,879 64,915 54,935 -
	577,345 100,537
	(3,538) (45)
	$ (573,807) $ (100,492)
	$ (0.11) $ (0.02)
	5,088,750 5,088,750

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

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Victory Capital Corp.

Consolidated Statements of Changes in Equity For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

Balance – December 31, 2019 Net loss for the year Balance - December 31, 2020 Subscription of shares Issuance of stock options Issuance of warrants Net loss for the year Balance - December 31, 2021		**Issued Capital **
	Shares Amount	Subscribed Shares Contributed Surplus Deficit Total Equity
	5,088,750 $ 767,579 - -	$ - $ 80,877 $ (340,266) $ 508,190 - - (100,492) (100,492)
	5,088,750 $ 767,579 - - - - - 12,091 - -	$ - $ 80,877 $ (440,758) $ 407,698 258,535 - - 258,535 - 54,935 - 54,935 - (12,091) - - - - (573,807) (573,807)
	5,088,750 $ 755,488	$258,535 $ 147,903 $ (1,014,565) $ 147,361

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

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Victory Capital Corp. Consolidated Statements of Cash Flow For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

Victory Capital Corp. Consolidated Statements of Cash Flow For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars
	2021 2020 $ (573,807) $ (100,492) 54,935 - (3,538) (45) 390,673 17,603
Operating Activities Net loss for the year Items not affecting cash: Share-based compensation Accrued interest income Changes in non-cash operating working capital: Accounts payable and accrued liabilities Investing Activities Loan receivables Financing Activities Share issuance costs Due to Acapulco Change in Cash Cash - beginning of year Cash - end of year
	(131,737) (82,889) (110,000) (15,000)
	(110,000) (15,000) (30,465) - 110,010 -
	79,545 - (162,192) (97,934) 426,284 524,218
	$ 264,092 $ 426,284

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

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

1. Nature of Operations

Victory Capital Corp. (the "Company" or “Victory”) was incorporated on November 6, 2009, pursuant to the Business Corporation Act (Ontario) and is classified as a Capital Pool Corporation ("CPC") as defined in Policy 2.4 of the TSX Venture Exchange Inc. ("the Exchange") Corporate Finance Manual. The Company was inactive from the date of incorporation until May 2016. The Company has no significant assets other than cash and proposes to identify and evaluate potential acquisitions or businesses with a view to completing a Qualifying Transaction, as defined in Exchange Policy 2.4. The Company will not carry on any business other than the identification and evaluation of assets or businesses with a view to completing a Qualifying Transaction.

On November 24, 2020, the Company entered a letter of intent (the “LOI”) with Acapulco Gold Corporation (“Acapulco”). Pursuant to the LOI, the Company and Acapulco will negotiate and enter into a definitive agreement (the “Definitive Agreement”), pursuant to which it is anticipated that the Company will acquire all of the issued and outstanding securities of Acapulco at an exchange ratio to be determined in accordance with the Definitive Agreement, resulting in the reverse takeover of the Company by Acapulco (the “Proposed Transaction”).

On February 5, 2021, the Company and 1287878 B.C. Ltd., a wholly-owned subsidiary of Victory, which was incorporated on February 5, 2021, entered into a binding merger agreement with Acapulco, in respect of the completion of an arm’s length reverse-takeover transaction of Acapulco by Victory, which will constitute the completion of Victory’s Qualifying Transaction. (See Note 12)

The Company has filed a filing statement that is dated effective March 31, 2022 (the "Filing Statement") with the Exchange and on the Company’s SEDAR profile. The Company has announced the closing of the Qualifying Transaction resulting in the reverse takeover of the Company by Acapulco on April 27, 2022.

Subsequent to 2019 year-end and currently, there is a global outbreak of COVID-19 (coronavirus), which has a significant impact on businesses through restrictions put in place by the Canadian, provincial and municipal governments regarding travel, business operations, and isolations/quarantine orders. At this time, it is unknown the extent of the impact the COVID-19 outbreak may have on the Company as this will depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or maybe put, in place by Canada and other countries to fight the virus. While the extent of the impact is unknown, we anticipate that this outbreak may negatively impact the Company’s business and financial condition.

The Company’s principal place of business is 333 Bay Street, Suite 1700, Toronto, Ontario, M5H 2R2.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

2. Significant Accounting Policies

• a) Statement of Compliance

The significant accounting policies applied in the Company's consolidated financial statements are based on International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") effective as of December 31, 2021.

These consolidated financial statements were authorized for issuance by the Board of Directors of the Company on April 29, 2022.

• b) Basis of Presentation

The consolidated financial statements of the Company are prepared on a going concern basis. The Company’s functional and presentation currency is Canadian dollars.

• c) Basis of Consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, 1287878 B.C. Ltd. All intercompany transactions and balances have been eliminated upon consolidation.

• d) Basis of Measurement

The consolidated financial statements have been prepared on the historical basis and used the accrual basis of accounting, except for cash flow information.

e) Foreign Currency Translation

Monetary assets and liabilities of the Company denominated in a foreign currency are translated at the rate of exchange prevailing at the date of the consolidated statements of financial position and revenues and expenses are translated at the rate of exchange prevailing on the day of the transaction. Gains and losses on translation of these items are included in the consolidated statements of loss and comprehensive loss.

f) Cash

Cash includes bank deposits at a reputable financial institution in Canada.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

2. Significant Accounting Policies (Continued)

• g) Financial Instruments

IFRS 9 includes requirements for recognition and measurement, impairment, derecognition, and general hedge accounting. Financial assets within the scope of IFRS 9 are classified in the following measurement categories: amortized cost, fair value through profit or loss (“FVTPL”), or fair value through other comprehensive income (“FVOCI”). Financial liabilities are classified in the following measurement categories: fair value through profit or loss, or amortized cost.

Financial assets

The Company’s financial assets consist of cash, funds held in trust and loan receivable. Cash is measured at FVTPL, funds held in trust at FVTPL, and loan receivable is measured at amortized cost.

Amortized Cost

Financial assets classified as amortized cost are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are carried at amortized cost less any provision for impairment. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default.

Fair value through profit or loss

Financial assets classified as FVTPL are measured at fair value with changes in fair value recognized in net profit or loss.

Classification

The Company determines the classification of its financial assets at initial recognition. All financial assets are recognized initially at fair value plus, in the case of financial assets not classified as FVTPL, directly attributable transaction costs.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

2. Significant Accounting Policies (Continued)

Impairment of Financial Assets

Financial assets not measured at FVTPL are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the financial assets have been negatively impacted. Evidence of impairment could include: significant financial difficulty of the issuer or counterparty; default or delinquency in interest or principal payments; or the likelihood that the borrower will enter bankruptcy or financial reorganization.

Financial Liabilities

The Company’s financial liabilities consist of accounts payable and accrued liabilities, and other payables. Accounts payable and accrued liabilities, and other payables are measured at amortized cost.

Amortized Cost

Financial liabilities measured at amortized cost, including borrowings, are initially measured at fair value, net of transaction costs. Financial liabilities measured at amortized cost are subsequently measured at amortized cost using the effective interest method, with interest recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest costs over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability or to the net carrying amount on initial recognition.

Derecognition of Financial Liabilities

The Company de-recognizes financial liabilities when the obligations are discharged, cancelled or expire.

• h) Deferred Taxes

Income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax is recognized and measured at the amount expected to be recovered from or payable to the taxation authorities based on the income tax rates enacted or substantively enacted at the end of the reporting period and includes any adjustment to taxes payable in respect of previous years.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

2. Significant Accounting Policies (Continued)

• h) Deferred Taxes (continued)

Deferred tax is recognized on any temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable earnings. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized and the liability is settled. The effect of a change in the enacted or substantively enacted tax rates is recognized in net earnings and comprehensive income or in equity depending on the item to which the adjustment relates.

A deferred tax asset is recognized to the extent that is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

• i) Related Party Transactions

Parties are considered to be 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 or common significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related party transactions that are in the normal course of business and have commercial substance and are measured at the fair value.

j) Loss per Share

Per IAS 33 "Earnings per Share" applies to a company whose common shares or potential common shares are traded in a public market or that files, or is in the process of filing, its financial statements with a securities commission or other regulatory organization for the purpose of issuing common shares in a public market. Loss per share is computed by dividing the loss for the period by the weighted average number of common shares outstanding during the period, including contingently issuable shares which are included when the conditions necessary for issuance have been met. Diluted loss per share is calculated in a similar manner, except that the weighted average number of common shares outstanding is increased to include potentially issuable common shares from the assumed exercise of common share purchase options and warrants, if dilutive. In order to calculate loss per share in these consolidated financial statements, the Company has calculated the weighted average number of shares outstanding for the years ended December 31, 2021 and 2020. During the years ended December 31, 2021 and 2020, the Company's outstanding stock options and warrants were anti-dilutive.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

2. Significant Accounting Policies (Continued)

k) Share-Based Payments

The Company offers a share option plan for its directors, officers, employees and selected consultants. Each tranche in an award is considered a separate award with its own vesting period and grant date fair value. Fair value of each tranche is measured using the Black-Scholes option pricing model. Compensation expense is recognized over the tranche's vesting period by increasing contributed surplus based on the number of awards expected to vest.

The Company may, from time to time, issue warrants to agents in connection with raising capital for the Company. The fair value of each warrant is measured using the Black-Scholes option pricing model. The resulting expense is recognized in equity as a reduction of the proceeds from the capital raise.

Any consideration paid on exercise of share options and warrants is credited to share capital. The contributed surplus resulting from share-based compensation is transferred to share capital when the options and warrants are exercised.

Share-based payments granted to non-employees are measured at the fair value of goods received unless that cannot be reasonably estimated in which case the fair value of the equity instrument is used.

• l) New accounting standards issued but not yet effective

Certain new standards, interpretations and amendments to existing standards have been issued by the IASB or the International Financial Reporting Interpretations Committee (“IFRIC”) that are mandatory for accounting periods beginning on or after December 31, 2021, or later periods. Some updates that are not applicable or are not consequential to the Company may have been excluded from the list below.

IAS 1, Presentation of Financial Statements (Amendments)

Amendments to IAS 1, Presentation of Financial Statements clarifies the presentation of liabilities in the statement of financial position. The classification of liabilities as current or noncurrent is based on contractual rights that are in existence at the end of the reporting period and is unaffected by expectations about whether an entity will exercise its right to defer settlement. A liability not due over the next twelve months is classified as non-current even if management intends or expects to settle the liability within twelve months. The amendment also introduces a definition of ‘settlement’ to make clear that settlement refers to the transfer of cash, equity instruments, other assets, or services to the counterparty.

The amendments are effective for annual periods beginning on or after January 1, 2023. The Company does not expect the adoption of this standard to have a significant impact on the Company’s consolidated financial statements.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

2. Significant Accounting Policies (Continued)

• m) Significant Accounting Judgments and Estimates

The preparation of financial statements in conformity with IFRS requires management to make certain judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. These consolidated financial statements include estimates, that, by their nature, are uncertain. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.

Information about the significant judgments, estimates and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses are discussed below.

Deferred tax liabilities and assets

Deferred tax liabilities and assets are measured at tax rates expected to apply in the period during which the asset is realized or the liability is settled, based on tax rates (and tax laws) that are enacted or substantively enacted at the end of the reporting period of the financial information.

The measurement of liabilities and deferred tax assets reflects the tax consequences that result from the manner in which the Company expects, at the end of the reporting period of the financial information, to recover or settle the carrying amount of its assets and liabilities.

Share-based compensation

The Company recognizes compensation expense on options granted. Compensation expense is based on the estimated fair value of each option at its grant date, the estimation of which requires management to make assumptions about future volatility of the Company’s stock price, future interest rates, future forfeiture rates and the timing with respect to exercise of the options. The effects of a change in one or more of these variables could result in a materially different fair value.

Finders’ warrants

The Company estimated the fair value of the finders’ warrants based on the management’s assumptions about future volatility of the Company’s stock price, future interest rates, and the timing with respect to exercise of the warrants. The effects of a change in one or more of these variables could result in a materially different fair value.

Going concern

The assessment of the Company’s ability to continue as a going concern involves judgment regarding future funding available for its investment projects and working capital requirements.

• n) Comparative Figures

Certain comparative figures have been restated where necessary to conform with current period presentation.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

3. Cash Restriction

The proceeds raised from the issuance of common shares may only be used to identify and evaluate assets or businesses for future investment, with the exception that not more than $3,000 per month on administrative and general expenses of the Corporation, with no cumulative maximum. These restrictions apply until completion of a Qualifying Transaction by the Corporation as defined under the Exchange Policy 2.4.

4. Issued Capital

The Company is authorized to issue an unlimited number of common shares with no par value. As of December 31, 2021 and 2020, there was 5,088,750 common shares outstanding.

During the year ended December 31, 2016, the Company issued 1,200,000 common shares for gross proceeds of $120,000. Upon closing of the Offering, the 1,200,000 issued common shares of the Company outstanding as of December 31, 2016 became subject to a CPC Escrow Agreement. Under the CPC Escrow Agreement, 10% of the escrowed common shares will be released from escrow on the issuance of the Final Exchange Bulletin (the "Initial Release") and an additional 15% will be released on the dates that are 6 months, 12 months, 18 months, 24 months, 30 months and 36 months following the Initial Release.

During the year ended December 31, 2017, the Company issued 3,888,750 common shares for gross proceeds of $777,750 pursuant to its initial public offering (the "Offering"). In connection with the issuance of the common shares, the Company paid commissions and other expenses of $130,171 and issued 388,875 agent's warrants which were expired in 2019.

There were no shares issued for the years ended December 31, 2021 and 2020. Shares held in escrow for the year ended December 31, 2021 were 1,200,000 shares (2020 – 1,200,000 shares).

5. Subscribed Shares

In October 2021, for the purpose of completing the proposed reverse takeover transaction of Acapulco Gold Corp. (“Acapulco”) by the Company (the “Proposed Transaction”), which will result in Acapulco becoming a wholly-owned subsidiary of Victory (after completion of the Proposed Transaction, the “Resulting Issuer”), concurrently with the private placement of subscription receipts (the “Acapulco Private Placement”) by the Acapulco, the Company closed a private placement of subscription receipts (the “Victory Subscription Receipts”) for aggregate gross proceeds of approximately $289,000 through the issuance of 1,445,000 Victory Subscription Receipts at a price of $0.20 per Victory Subscription Receipt (the “Victory Private Placement”). (See note 12)

Upon the closing of the Proposed Transaction, each Victory Subscription Receipt will be automatically exchanged for one Resulting Issue Share.

In connection with the Victory Private Placement, Victory paid aggregate fees of $23,120 and issued finders’ warrants to purchase 115,600 Resulting Issuer Shares at a price of $0.20 per Resulting Issuer Share exercisable for a period of 24 months from the date of closing of the Victory Private Placement to certain qualified finders.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

5. Subscribed Shares (Continued)

As of December 31, 2021, the net proceeds of $289,000 was recorded as subscription receivable on the Company’s Consolidated Statements of Financial Position. The Company recorded $258,535 as subscribed shares after deducing the related issuance costs in the Company’s shareholders’ equity.

Part of the proceeds from Acapulco Private Placement amounted to $110,010 was deposited to the Company’s bank account and was recorded as other payable on the Company’s Consolidated Statements of Financial Position as of December 31, 2021. This amount was returned to Acapulco in January 2022.

6. Stock Options

During the year ended December 31, 2017, the Company granted 508,875 stock options under the Company’s Stock Option Plan. During the year ended December 31, 2019, the Company granted 101,775 stock options under the Company’s Stock Option Plan. During the year ended December 31, 2019, 203,550 stock options expired due to a resignation of two directors of the Company.

On November 30, 2021, the Company cancelled 305,325 outstanding stock options held by former directors, and granted an aggregate of 305,325 stock options to certain directors of the Company to purchase 305,325 common shares in the capital of the Company pursuant to the Company’s stock option plan. These options vest immediately and are exercisable at an exercise price of $0.20 per share with the expiry date of November 30, 2026. The Company has also extended the maturity date of the remaining outstanding 101,775 stock options granted in 2019 from December 8, 2022 to December 8, 2027.

The fair value of the granted options in November 2021 was estimated at the grant date based on the Black-Scholes pricing model, using the following inputs and assumptions:

Expected forfeiture rate	Nil
Expected dividend yield	Nil
Risk-free interest rate	0.44%
Expected life	5 years
Expected volatility	100%
Share price	$0.20

The Company recorded $54,935 stock-based compensation expense for the year ended December 31, 2021 (2020 - $nil).

As of December 31, 2021, the Company had 407,100 outstanding vested stock options with an exercise price of $0.20 per share and a weighted average remaining term over 5.1 years.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

7. Warrants

During the year ended December 31, 2021, and in connection with the Victory Private Placement (See Note 12), Victory paid aggregate fees of $23,120 and issued finders’ warrants to purchase 115,600 Resulting Issuer Shares at a price of $0.20 per Resulting Issuer Share exercisable for a period of 24 months from the date of closing of the Victory Private Placement to certain qualified finders.

The fair value of the total 115,600 finders’ warrants is estimated on the grant date using the Black-Scholes option model valued at $12,090, with the following weighted-average variables: risk-free interest rate of 0.51%, expected life of 2 years, expected stock price volatility of 100% and expected dividend rate of 0%. These warrants have a weighted average remaining term over 1.83 years with an exercise price of $0.20.

8. Financial Instruments and Other Risks

IFRS 7 establishes a fair value hierarchy that reflects the significance of inputs used in making fair value measurements as follows:

Level 1 quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (ie. as prices) or indirectly (ie. from derived prices); and

• Level 3 inputs for the asset or liability that are not based upon observable market data.

Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As at December 31, 2021, the Company’s cash was classified as Level 1 measurement. As at December 31, 2021, the Company had no financial instruments classified at Level 2 and Level 3.

Fair Values

Except as disclosed elsewhere in these consolidated financial statements, the carrying amounts for the Company’s financial instruments approximate their fair values because of the short-term nature of these items.

The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:

Market Risk

Market risk refers to the risk that a change in the level of one or more of market prices, interest rates, foreign exchange rates, indices, volatilities, correlations, or other market factors, such as liquidity, will result in a change in the fair value of a financial instrument. The Company's financial instruments are designated as at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. Therefore, changes in fair value or permanent impairment, if any, affect reported earnings as they occur, except for amortized cost. The Company separates market risk into two categories: interest rate risk and foreign exchange risk.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

8. Financial Instruments and Other Risks (Continued)

Market Risk (continued)

Interest Rate Risk

Interest rate risk arises from the possibility that changes in interest rates will affect the value of financial instruments. The Company does not hedge its exposure to interest rate risk as such risk is minimal. None of the Company's financial instruments are subject to variable interest rates.

Foreign Exchange Risk

Foreign exchange risk arises from the possibility that changes in the price of foreign currencies will result in changes in carrying value. The Company does not hold any assets denominated in currencies other than the Canadian dollar and is not subject to foreign currency risk.

Credit Risk

As at December 31, 2021, the Company’s maximum exposure to credit risk was the book value of cash and loan receivables. The Company limits its credit exposure on cash by holding its deposits mainly with high credit quality financial institutions as determined by credit rating agencies. Credit risk arising on loan receivables is not significant given the counterparty is the entity that Victory is going to acquire through a reverse-takeover transaction.

Liquidity Risk

Liquidity risk refers to the risk that the Company will not be able to meet its financial obligations when they become due. The Company's management is responsible for reviewing liquidity resources to ensure funds are readily available to meet its financial obligations as they come due, as well as ensuring adequate funds exist to support business strategies and operations growth. The majority of current assets reflected on the consolidated statements of financial position are highly liquid. As at December 31, 2021, the Company had current assets of $681,675 (2020 - $441,329) to settle current liabilities of $534,314 (2020 - $33,631).

9. Capital Disclosures

As at December 31, 2021, the Company was not subject to any regulatory capital requirements. The Company's capital is composed of equity, including shareholder's equity and deficit.

The Company’s objectives when managing capital include:

• (a) ensuring that the Company meets relevant regulatory capital requirements when applicable,

• (b) ensuring that the Company is able to meet its financial obligations as they become due; and

• (c) ensuring that it has sufficient cash resources to fund the identification and evaluation of potential acquisitions.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There has been no change with respect to the overall capital risk management strategy for the year ended December 31, 2021.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

10. Deferred Taxes

a) Income Tax Expense

The reconciliation of the combined Canadian federal and provincial statutory income tax rate of 26.5% (2020 - 26.5%) is as follows:

	2021	2020
	$	$
Net loss before tax	(573,807)	(100,492)
Statutory tax rate	26.50%	26.50%
Expected income tax (recovery)	(152,509)	(26,630)
Non-deductible and other items	14,588	-
Share issuance costs	(11,277)	-
Change in deferred tax assets not recognized	148,778	26,630
Total income tax expense(recovery)	-	-

Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and tax values.

The unrecognized deductible temporary differences as at December 31, 2021 are comprised of the following:

	2021	2020
	$	$
Share issuance costs	34,044	30,100
Non-capital losses	995,804	438,300
Unrecognized deductible temporarydifferences	1,029,849	468,400

The Company has non-capital loss carryforwards of approximately $995,804 which may be carried forward to apply against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:

Expiry		Total
2036	$	26,476
2037		69,497
2038		97,446
2039		103,289
2040		141,624
2041		557,472
TOTAL	$	995,804

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

11. Related Party Transactions

During the year ended December 31, 2021, the Company incurred consulting fees of totaling $37,800 (2020 – $9,450) payable to Pan-Pacific Supreme Enterprises Ltd., a company related to one of the Company’s directors. At December 31, 2021 and 2020, $47,250 and $9,450 were outstanding to this party and included in accounts payable and accrued liabilities, respectively.

During the year ended December 31, 2021, the Company recorded stock-based compensation of $54,935 for the options granted to certain directors under the Company’s Stock Option Plan (2020 – $nil). (See Note 6)

12. Proposed Qualifying Transaction and Subsequent Events

Proposed Transaction

On February 5, 2021, the Company and 1287878 B.C. Ltd., a wholly-owned subsidiary of the Company, which was incorporated on February 5, 2021, entered into a binding merger agreement with Acapulco, in respect of the completion of an arm’s length reverse-takeover transaction of Acapulco by the Company (the “Proposed Transaction”), which will constitute the completion of the Company’s Qualifying Transaction. The Proposed Transaction will result in the Company acquiring all of the issued and outstanding securities of Acapulco in exchange for the issuance of securities of the Company, which will result in Acapulco becoming a wholly-owned subsidiary of the Company.

The completion of the Proposed Transaction is subject to the satisfaction of various conditions that are customary for a transaction of this nature, including but not limited to: (i) the completion a concurrent financing for gross proceeds from a minimum of $2,500,000 and up to a maximum of $3,500,000 (the “Private Placement”) through the issuance of subscription receipts of Acapulco (the “Subscription Receipts”); (ii) the approval by the directors of Victory and Acapulco of the Proposed Transaction and the matters related therein; and (iii) the receipt of all requisite regulatory, stock exchange, or governmental authorizations and consents, including the Exchange.

The Company has filed a filing statement that is dated effective March 31, 2022 (the "Filing Statement") with the Exchange and on the Company’s SEDAR profile. The Company has announced the closing of the Qualifying Transaction resulting in the reverse takeover of the Company by Acapulco on April 27, 2022.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

12. Proposed Qualifying Transaction and Subsequent Events (Continued)

Bridge Loans

On November 24, 2020, the Company entered into a letter of intent (the “LOI”) with Acapulco Gold Corporation (“Acapulco”). Pursuant to the LOI, the Company will provide Acapulco with a bridge loan in the amount of up to $100,000 (the “Loan”) for working capital purposes.

The loan bears interest of 6% per annum, and the outstanding principal plus accrued interest shall be repaid the earlier of (i) receipt of final approval of the TSXV for the Proposed Transaction; and (ii) June 30, 2021.

On August 16, 2021, the payback date was amended to the earlier of (i) receipt of final approval of the TSXV for the Proposed Transaction; and (ii) November 30, 2021. In November 2021, the payback date was amended to the earlier of (i) receipt of final approval of the TSXV for the Proposed Transaction; and (ii) March 31, 2022.

In October, 2021, the Company agreed to provide additional secured bridge loan in the aggregate amount of up to $125,000 for working capital purposes (the “Additional Bridge Loan”). This Additional Bridge Loan is subject to the approval of the Exchange and is in addition to the initial secured bridge loan extended by Victory to Acapulco in the amount of $100,000. The Additional Bridge Loan bears an interest rate of 6% per annum and the outstanding principal plus accrued interest shall be payable back on the earlier of: (i) receipt of final approval of the Exchange for the Proposed Transaction; and (ii) December 31, 2021.

In March, 2022, the Company further amended the loan payback date to the earlier of (i) receipt of final approval of the TSXV for the Proposed Transaction; and (ii) July 31, 2022.

As of December 31, 2021, the Company advanced total bridge loans of $125,000 (2020 - $15,000) to Acapulco.

For the years ended December 31, 2021 and 2020, the Company recorded interest income of $3,538 and $45 in connection with these bridge loans. As of December 31, 2021 and 2020, the Company had loan receivable balance of $128,583 and $15,045, respectively.

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Victory Capital Corp. Notes to Consolidated Financial Statements For the Years Ended December 31, 2021 and 2020 Stated in Canadian Dollars

12. Proposed Qualifying Transaction and Subsequent Events (Continued)

Private Placements

In October 2021, the Company closed a private placement of subscription receipts (the “Victory Subscription Receipts”) for aggregate gross proceeds of approximately $289,000 through the issuance of 1,445,000 Victory Subscription Receipts at a price of $0.20 per Victory Subscription Receipt (the “Victory Private Placement”).

The Victory Private Placement took place concurrently with the private placement of subscription receipts by Acapulco (the “Acapulco Subscription Receipts”) for aggregate gross proceeds of approximately $4.043 million through the issuance of 20,215,000 Acapulco Subscription Receipts at a price of $0.20 per Acapulco Subscription Receipt (the “Acapulco Private Placement”).

Upon the closing of the Proposed Transaction, the Acapulco Subscription Receipts will be automatically exchanged for one common share of Acapulco (a “Acapulco Common Share”), and subsequently each Acapulco Common Share will be automatically exchanged for one common share in the capital of the Resulting Issuer (a “Resulting Issuer Share”). Upon the closing of the Proposed Transaction, each Victory Subscription Receipt will be automatically exchanged for one Resulting Issue Share.

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