Geomega Resources : Earnings Document

Geomega Resources Inc.

Unaudited Condensed Interim Consolidated Financial Statements

For the three months ended August 31, 2023

The accompanying financial statements have been prepared by the management

of Geomega Resources Inc. and have not been reviewed by the auditors

Geomega Resources Inc.

Consolidated Statements of Financial Position

(unaudited, in Canadian Dollars)

		As at	As at
		August 31,	May 31,
	Note	2023	2023
Assets		$	$
Current assets
Cash and cash equivalents	4	2,938,721	3,799,111
Accounts receivable	8	396,378	594,963
Tax credits and government grants receivable	9	782,483	453,376
Investments	5	522,000	522,000
Investment in a listed company	6	49,106	67,574
Prepaid expenses and others		105,360	56 051
Inventories		20,538	18 561
Current assets		4,814,586	5,511,636
Non-current assets
Investment in an associate	7	590,000	842,857
Deposits on acquisition of property and equipment, net of
government grants		331,162	283,559
Property and equipment, net of government grants	10	518,796	427,893
Right-of-use assets	11	2,265,469	2,298,752
Non-current assets		3,705,427	3,853,061
Total assets		8,520,013	9,364,697
Liabilities
Current liabilities
Trade and other payables		602,637	626,007
Deferred grants	12	311,260	680,650
Deferred revenues		552,047	338,668
Current portion of the long-term debt	14	78,161	76,809
Current portion of the lease obligations	13	108,998	74,646
Current liabilities		1,653,103	1,796,780
Non-current liabilities
Lease obligations	13	2,283,879	2,289,819
Non-current liabilities		2,283,879	2,289,819
Total liabilities		3,936,982	4,086,599
Equity
Share capital		38,515,697	38,515,697
Stock options	17	1,168,227	1,152,537
Contributed surplus		4,524,149	4,524,149
Deficit		(39,625,042)	(38,914,285)
Total equity		4,583,031	5,278,098
Total liabilities and equity		8,520,013	9,364,697

The accompanying notes are an integral part of these consolidated Financial Statements.

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Geomega Resources Inc.

Consolidated Statements of Income and Comprehensive Income

(unaudited, in Canadian Dollars)

		Three months ended
		August 31
	Note	2023	2022
Research fees		129,440	82,345
Revenues		129,440	82,345
Operating expenses
Salaries, employee benefits and share-based
compensation		105,654	61,585
Exploration and evaluation expenses, net of tax credits	18	651,036	257,820
Professional fees		96,448	55,230
Travel, conference and investor relations		36,038	56,307
Administration		14,966	7,328
Filing fees		12,328	8,919
Rent		23,750	36,776
Depreciation of right-of-use assets		61,783	20,073
Insurance, taxes and permits		6,547	5,719
Government grants on operating expenses		(466,301)	(37,590)
Operating loss		(412,809)	(378,193)
Other income (expenses)
Investment income		38,969	13,708
Gain (loss) on foreign exchange		(12,047)	11,654
Finance costs		(78,311)	(13,041)
Gain on disposal of exploration and evaluation assets		44,492	-
Unrealized loss in fair value of investments in listed
companies		(38,194)	-
Share of loss of associate		(818)	(50,468)
Impairment of an investment in an associate		(252,039)	(394,437)
		(297,948)	(432,584)
Net and comprehensive loss		(710,757)	(810,777)
Basic and diluted loss per share		(0.004)	(0.006)
Weighted average number of basic & diluted shares outstanding		141,826,521	141,379,304

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

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Geomega Resources Inc.

Consolidated Statements of Change in Equity

(Unaudited, in Canadian dollars)

		Number of
		shares			Contributed
	Note	outstanding	Share Capital	Stock-options	Surplus	Deficit	Total Equity
			$	$	$	$	$
Balance at May 31, 2023		141,826,521	38,515,697	1,152,537	4,524,149	(38,914,285)	5,278,098
Net and comprehensive loss		-	-	-	-	(710,757)	(710,757)
Shared-based compensation		-	-	15,690	-	-	15,690
Balance at August 31, 2023		141,826,521	38,515,697	1,168,227	4,524,149	(39,625,042)	4,583,031
	Number of
	shares		Broker		Contributed
Note	outstanding	Share Capital	warrants	Stock-options	Surplus	Deficit	Total Equity
		$	$	$	$	$	$
Balance at May 31, 2022	141,368,521	38,435,625	27,477	1,069,608	4,424,649	(37,513,413)	6,443,946
Net and comprehensive loss	-	-	-	-	-	(810,777)	(810,777)
Exercised stock options	75,000	18,077	-	(6,452)	-	-	11,625
Expired options	-	-	-	(11,812)	11,812	-	-
Shared-based compensation	-	-	-	46,336	-	-	46,366
Balance at August 31, 2022	141,444,521	38,453,702	27,477	1,097,680	4,436,461	(38,324,190)	5,691,130

The accompanying notes are an integral part of these consolidated Financial Statements.

Geomega Resources Inc.

Consolidated Statements of Cash Flow (Unaudited, in Canadian dollars)

		Three months ended
		August 31
	Note	2023	2022
Operating activities		$	$
Net and comprehensive loss		(710,757)	(810,777)
Adjustments for:
Share-based compensation		15,690	46,336
Unrealized loss on foreign exchange rate		247	-
Depreciation of property and equipment		19,530	2,187
Depreciation of right-of-use assets		61,783	20,073
Finance costs for the accretion of long-term debt		1,352	1,261
Share of loss of an associate		818	50,468
Net loss on dilution of investment in an associate		-	394,437
Impairment of an investment in an associate	7	252,039	-
Unrealized loss on variation of value of an investment in a listed
company		38,194	-
Gain on disposal of exploration and evaluation assets - non
cash portion	18.3	(19,973)	-
Changes in non-cash working capital items	19	(64,689)	372,228
Cash flows from operating activities		(405,766)	(76,213)
Investing activities
Deposits on acquisition of property and equipment		(102,100)	(457,993)
Additions of property and equipment		(352,436)	(1,885)
Government grants received for the purchase of property and
equipment	12	-	53,433
Cash flows from investing activities		(454,536)	(406,445)
Financing activities
Exercise of stock options		-	11,625
Repayments of lease liability		(88)	(16,162)
Cash flows from financing activities		(88)	(4,537)
Net change in cash		(860,390)	(334,769)
Cash and cash equivalents - beginning		3,799,111	5,084,902
Cash and cash equivalents - ending		2,938,721	4,750,133

The accompanying notes are an integral part of these consolidated Financial Statements.

Geomega Resources Inc.

Notes to the Condensed Interim Consolidated Financial Statements

(Unaudited, in Canadian dollars)

1. NATURE OF OPERATIONS AND GOING CONCERN
   Geomega Resources Inc. (the "Corporation") is incorporated under the Canada Business Corporations Act and is engaged in the acquisition, exploration and evaluation of mining properties in Canada. Through its private and wholly owned subsidiary Innord, the Corporation is developing innovative technologies for extraction and separation of rare earth elements and other critical and strategic metals from its mining properties and other mining and industrial waste, in an environmentally sustainable way. The Corporation's shares are listed on the TSX Venture Exchange (the "Exchange") under symbol GMA. The address of the Corporation's registered office and principal place of business is 75, de Mortagne Boulevard, Boucherville, Quebec, Canada, J4B 6Y4. These consolidated Financial Statements (the "Financial Statements") were approved by the Corporation's Board of Directors on October 13, 2023.
   The Financial Statements have been prepared in accordance with valid accounting principles in a context of going concern which provides that the Company will be able to realize its assets and pay its debts in the normal course of its activities. In assessing the validity of the going concern principle, management considers all available data regarding the future, which represents at least, but is not limited to, the twelve months following the end of the reporting period. For the three months ended August 31, 2023, the Corporation recorded a net loss of $710,757 and accumulated a deficit of $39,625,042 as of that date. As of August 31, 2023, the Company had a working capital of $3,161,483.
   Any funding shortfall may be met in the future in a number of ways including but not limited to, the issuance of new equity or debt financing. While management has been successful in securing financing in the past, there can be no assurance that it will be able to do so in the future or that these sources of funding or initiatives will be available to the Corporation or that they will be available on terms which are acceptable to the Corporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. Declaration of conformity
   The Financial Statements have been prepared in accordance with International Financial Reporting Standards ("International Financial Reporting Standards" or "IFRS") as published by the International Accounting Standards ("IAS") and which are applicable for the preparation of interim consolidated financial statements, in particular International Accounting Standard 34 ("International Accounting Standard 34" or "IAS 34") - Interim financial information. The Financial Statements therefore do not include all the information and notes required under IFRS for the purposes of annual financial statements.
2. Basis of Presentation
   The Financial Statements should be read in conjunction with the audited annual financial statements for the year ended May 31, 2023, which have been prepared in accordance with IFRS. The accounting conventions and the calculation and presentation methods used in the preparation of the Financial Statements comply with the conventions and methods used for the previous financial year ended May 31, 2023.

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Geomega Resources Inc.

Notes to the Condensed Interim Consolidated Financial Statements

(Unaudited, in Canadian dollars)

3. CRITICAL ACCOUNTING ESTIMATES, JUDGMENTS AND ERRORS

The preparation of financial statements in accordance with IFRS requires the Company to make estimates and assumptions that affect the amounts reported as assets and liabilities, the presentation of assets and at the date of the Financial Statements as well as the amounts presented as income and expenses during the reporting period. The Company also makes estimates and assumptions for the future. The determination of estimates requires the exercise of judgment based on various assumptions as well as other factors such as historical experience and current and expected economic conditions. Actual results could differ from these estimates.

Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations about future events, which are believed to be reasonable under the circumstances.

In preparing the Financial Statements, the main judgments made by management in applying the Company's accounting policies and the main sources of estimation uncertainty were the same as those that applied to the annual financial statements for the fiscal year ended May 31, 2023.

4. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include available cash, bank balances and short-term liquid investments with an original maturity of up to 3 months or redeemable at any time without penalty.

The short-term investments held as of August 31, 2023 and classified as cash equivalent include the following investments:

• Guaranteed investments certificates totaling $2,329,400 with rates from 4.00% to 4.05% and maturity dates ranging from January 17, 2024 to March 7, 2024. Interest and principal are cashable at any time without penalty.
• Investment of US $161,187 (CAD $218,174) in a high interest exchange trading fund. Investment is cashable at any time without penalty.

The Corporation also has access to a credit facility of $3,046,044. The loan is interest-free, has an 8- year term, with an annual principal repayment commencing 24 months after the first withdrawal, which has not yet taken place as of August 31, 2023.

5. INVESTMENTS

The investments as at August 31, 2023 consist of guaranteed investment certificates that are non- cashable prior to maturity. The certificates totalize $522,000 in nominal value, bear interest with rates ranging from 2.25% to 5.10% and expiring dates ranging from October 3, 2023 to January 31, 2024.

6. INVESTMENT IN A LISTED COMPANY

The Corporation holds marketable securities. The investment is listed on the Exchange and valued at fair value based on quoted market prices.

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Geomega Resources Inc.

Notes to the Condensed Interim Consolidated Financial Statements

(Unaudited, in Canadian dollars)

6. INVESTMENTS IN LISTED COMPANIES (CONT'D)

The shares are listed on the Exchange. The total amount of the investment can be summarized as follows:

		As at	As at
		August 31	May 31
		2023	2023
	Classified as current asset	$	$
	MTM Critical Metals Ltd. - 1,123,700 common shares (666,667
	as at May 31, 2023) - $0.05 AUD ($0.115 AUD as at May	49,106	67,574
31, 2023)
	Investment in a listed company	49,106	67,574
7. INVESTMENT IN AN ASSOCIATE

Kintavar Exploration Inc. ("Kintavar") is the Corporation's only associate. Kintavar's share capital consists solely of ordinary shares, which are held directly by the Corporation. Kintavar is incorporated in Canada where its exploration and evaluation activities on bearing properties are carried out. The proportion of ownership interest is the same as the proportion of voting rights held. The investment in Kintavar is accounted for under the equity method. Its fair value as at May 31, 2023 is $590,000 (16,857,143 shares at $0.035, closing price on the Exchange). Considering the fair value of the investment is lower than its carrying value as at August 31, 2023, an impairment loss of $252,039 has been recorded in the consolidated statement of losses in order to reduce the investment to its estimated recoverable value, in this case its fair market value. Its fair value was of $842,857 as at May 31, 2023. The Corporation categorized the fair value measurement as Level 1, as it is derived from quoted prices in active markets. No shares were issued in the first three months of fiscal 2024, thus the Corporation's interest in Kintavar was not diluted and remains at 13.11%.

Determination of significant influence

Management determines its ability to exercise significant influence over an investment in shares of other companies by looking at its percentage interest and other qualitative factors including but not limited to its voting rights, representation on the board of directors, participation in policy-making processes, material transactions between the Corporation and the associate, interchange of managerial personnel, provision of essential technical information and operating involvement. Considering these factors, Geomega is considered to have significant influence over Kintavar.

	Three months
	ended	Year ended
	August 31, 2023	May 31, 2023
	$	$
Balance at beginning of period	842,857	1,372,048
Share of net and comprehensive loss	(818)	(193,787)
Net gain from dilution of the interest	-	(19,041)
Impairment to fair market value	(252,039)	(316,363)
Balance at end of period	590,000	842,857

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Geomega Resources Inc.

Notes to the Condensed Interim Consolidated Financial Statements

(Unaudited, in Canadian dollars)

8. ACCOUNTS RECEIVABLE

	As at	As at
	August 31, 2023	May 31, 2023
	$	$
Trade receivables	70,118	343,010
Sales taxes receivable	125,780	110,293
Interest receivables	65,442	43,258
Other accounts receivables	135,038	98,402
Accounts receivable	396,378	594,963

9. TAX CREDITS AND GOVERNMENT GRANTS RECEIVABLE

	As at	As at
	August 31, 2023	May 31, 2023
	$	$
Refundable tax credits	56,293	2,173
Government grants receivable	726,190	451,203
Tax credits and government grants
receivable	782,483	453,376

Refundable tax credits are related to eligible mining exploration expenses incurred in the province of Quebec and the refundable portion of the research and development tax credits.

The government grants are related to expenditures on research and development incurred by the corporation and its subsidiary.

10. PROPERTY AND EQUIPMENT

	Office	E&E	Total
	equipment	Equipment
Three months ended August 31, 2023	$	$	$
Opening net book value	-	427,893	427,893
Additions	-	352,436	352,436
Government grants	-	(242,003)	(242,003)
Depreciation	-	(19,530)	(19,530)
Valeur comptable nette à la fin	-	518,796	518,796
As at August 31, 2023
Cost	14,984	820,675	835,659
Accumulated depreciation	(14,984)	(301,879)	(316,863)
Closing net book value	-	518,796	518,796

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Geomega Resources Inc.

Notes to the Condensed Interim Consolidated Financial Statements

(Unaudited, in Canadian dollars)

10. PROPERTY AND EQUIPMENT (CONT'D)

				Office	E&E	Total
				equipment	Equipment
	Fiscal 2023	$	$	$
	Opening net book value	-	100,532	100,532
	Additions	-	764,100	764,100
	Government grants	-	(402,628)	(402,628)
	Depreciation	-	(34,111)	(34,111)
	Closing net book value	-	427,893	427,893
	As at May 31, 2023
	Cost	14,984	710,244	725,228
	Accumulated depreciation	(14,984)	(282,351)	(297,335)
	Closing net book value	-	427,893	427,893
11. RIGHT-OF-USE ASSETS
					Industrial
				Equipment	buildings	Total
			Three months ended August 31, 2023	$	$	$
			Opening net book value	-	2,298,752	2,298,752
			Additions	28,500	-	28,500
			Depreciation	(950)	(60,833)	(61,783)
			Closing net book value	27,550	2,237,919	2,265,469
			As at August 31, 2023	28,500
			Cost	2,319,456	2,347,956
			Accumulated depreciation	(950)	(81,537)	(82,487)
			Closing net book value	27,550	2,237,919	2,265,469
				Industrial
				buildings
			Fiscal 2023	$
			Opening net book value	612,243
			Additions	2,220,600
			Revaluation	(439,786)
			Depreciation	(94,305)
			Closing net book value	2,298,752
			As at May 31, 2023
			Cost	2,319,456
			Accumulated Depreciation	(20,704)
			Closing net book value	2,298,752

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