Financial statements
Page 1
Highcliff Metals Corp. Financial Statements For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollar s)
Page 2
Mao & Ying LLP CHARTERED PROFESSIONAL ACCOUNTANTS 1488 - 1188 West Georgia Street, Vancouver, British Columbia, V6E 4A2 Telephone : 778-379-8518 Fax: 778-379-8502 INDEPENDENT AUDITOR’S REPORT To the Shareholders of Highcliff Metals Corp. Opinion We have audited the financial statements of Highcliff Metals Corp. (the “Company”), which comprise the statements of financial position as at April 30, 2026 and 2025, and the statements of loss and comprehensive loss, changes in equity and cash flows for the year s then ended, and notes to the financial statements, including material accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at April 30, 2026 and 2025, and its financial performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards (IFRSs). 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 financial statements section of our report. We are independent of the Company in accordance with ethical requirements that are relevant to our audit of the 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. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matter described below to be the key audit matter to be communicated in this report: Tax indemnity agreement asset As more fully described in Note 9 of the financial statements, the Company entered into a Tax Indemnity Agreement in 2022 with the lender (the “Lender”) of its promissory notes transferring the obligation to pay the withholding tax liability for deemed dividends related to the promissory notes from the Company to the Lender. The Company classified the Tax Indemnity Agreement financial asset as subsequently measured at fair value through profit and loss (“FVTPL) and determined the fair value of the Tax Indemnity Agreement asset is the same as the potential withholding taxes, penalties and interest. Auditing the fair value of the Tax Indemnity Agreement asset is a key audit matter as its fair value involved significant judgement from management. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. Our audit procedures included, among others: • Reviewing management’s fair value approach and calculation for the Tax Indemnity Agreement asset. • Reviewing the Company’s schedules calculating the withholding tax on the deemed dividend, the penalties and interest for accuracy. • Reviewing the appropriateness of the footnote disclosure in relation to the Tax Indemnity Agreement asset.
Page 3
Material Uncertainty Related to Going Concern We draw attention to Note 2 in the financial statements, which describes matters and conditions that indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Other Information Management is responsible for the other information. The other information comprises the Management's Discussion and Analysis. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, 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 financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the 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 financial statements Our objectives are to obtain reasonable assurance about whether the 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 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 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.
Page 4
• 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 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 financial statements, including the disclosures, and whether the 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 audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is Shaohua Huang. Vancouver, Canada, August 25, 2026 Chartered Professional Accountants
Page 5
Highcliff Metals Corp. Statements of Financial Position As at April 30, 2026 and 2025 (Expressed in Canadian dollars) The accompanying notes are in integral part of these financial statements. 5 Notes 2026 $ 2025 $ Assets Current assets Cash 105,453 7,575 Receivables 312 1,343 Prepaids 833 1,083 Tax indemnity agreement 6 1,750,407 1,694,671 Total assets 1,857,005 1,704,672 Liabilities Current liabilities Accounts payable and accrued liabilities 8 49,069 103,221 Other tax liability 6 1,944,897 1,882,967 Total liabilities 1,993,966 1,986,188 Shareholders’ deficit Share capital 7 22,917,991 22,674,931 Contributed surplus 1,862,766 1,862,766 Accumulated other comprehensive loss (“AOCL”) (22,718) (22,718) Deficit (24,895,000) (24,796,495) Total shareholders’ deficit (136,961) (281,516) Total liabilities and shareholders’ deficit 1,857,005 1,704,672 Nature of Operations (Note 1) Going Concern (Note 2) Subsequent Events (Note 11) On behalf of the Board “John Theobald” Director “W. Barry Girling” Director .
Page 6
Highcliff Metals Corp. Statements of Loss and Comprehensive Loss For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) The accompanying notes are in integral part of these financial statements. 6 Notes 2026 $ 2025 $ Operating expenses General and miscellaneous 20,878 28,935 Professional fees 8 73,416 96,736 Loss for the period before other items (94,294) (125,671) Other income (expense) items Foreign exchange gain (loss) 2,690 (548) Interest income 1,968 - Interest expense 6 (88,688) (110,332) Change in fair value of Tax Indemnity Agreement 6 79,819 10,667 Gain on write-off of accounts payable - 57,963 Loss and comprehensive loss for the year (98,505) (167,921) Total loss per share – basic and diluted 7(e) (0.01) (0.04) Weighted average number of shares outstanding – basic and diluted 8,149,943 4,120,457
Page 7
Highcliff Metals Corp. Statements of Cash Flows For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) The accompanying notes are in integral part of these financial statements. 7 2026 $ 2025 $ Operating activities Net loss for the year (98,505) (167,921) Items not involving cash: Change in fair value of Tax Indemnity Agreement (79,819) (10,667) Gain on write-off accounts payable - (57,963) Unrealized foreign exchange (gain) loss (2,675) 376 Changes in non-cash operating working capital items: Receivables 1,031 (1,172) Prepaids 250 (1,083) Accounts payable and accrued liabilities (54,152) (7,647) Other tax liability 88,688 110,332 Cash flows used in operating activities (145,182) (135,745) Financing activities Proceeds from issuance of shares 249,996 139,500 Share issuance costs (6,936) (3,988) Cash flows provided by financing activities 243,060 135,512 Increase in cash 97,878 (233) Cash, beginning of the year 7,575 7,808 Cash, end of the year 105,453 7,575
Page 8
Highcliff Metals Corp. Statements of Changes in Shareholders’ Equity (Deficit) For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) The accompanying notes are in integral part of these financial statements. 8 Number of shares # Share capital $ Contributed surplus $ AOCL $ Deficit $ Total deficit $ Balance as at April 30, 2024 2,343,265 22,539,419 1,862,766 (22,718) (24,628,574) (249,107) Share issuance for cash 2,325,000 139,500 - - - 139,500 Share issuance costs - (3,988) - - - (3,988) Loss for the year - - - - (167,921) (167,921) Balance as at April 30, 2025 4,668,265 22,674,931 1,862,766 (22,718) (24,796,495) (281,516) Share issuance for cash 4,166,598 249,996 - - - 249,996 Share issuance costs - (6,936) - - - (6,936) Loss for the year - - - - (98,505) (98,505) Balance as at April 30, 2026 8,834,863 22,917,991 1,862,766 (22,718) (24,895,000) (136,961)
Page 9
Highcliff Metals Corp. Notes to the Financial Statements For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) 9 1. NATURE OF OPERATIONS Highcliff Metals Corp. (the “Company”) was incorporated under the laws of British Columbia, Canada, in 1984. In 2004, the Company changed its corporate jurisdiction from a British Columbia company to a Canadian corporation. On April 5, 2023 the Company changed its name to Highcliff Metals Corp. from I-Minerals Inc. and continued into British Columbia. The Company is listed for trading on the TSX Venture Exchange NEX board under the symbol “HCM” and the OTC Pink Market under the symbol “IMAHF”. The Company’s principal business focus is to identify, evaluate, and acquire new commercial business opportunities or mineral exploration assets. 2. GOING CONCERN These financial statements have been prepared on a going concern basis, which assumes that the Company will be able to meet its obligations and continue its operations for the foreseeable future. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. Such adjustments could be material. At April 30, 2026, the Company had not yet achieved profitable operations, had an accumulated deficit of $24,895,000 since inception and expects to incur further losses in the development of its business. Although the Company has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to the Company. At April 30, 2026, the Company had working capital deficit of $ 136,961. The above factors cast significant doubt upon the Company’s ability to continue as a going concern and, therefore, it may be unable to realize its assets and discharge its liabilities in the normal course of business. Subsequent to April 30, 2026, the Company completed a private placement financing for gross proceeds of $700,039 (Note 11). 3. BASIS OF PRESENTATION AND MATERIAL ACCOUNTING POLICIES These financial statements, including comparatives have been prepared using IFRS Accounting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) . The financial statements have been prepared on a historical cost basis, except for certain financial instruments recorded at their fair value. In addition, these financial statements have been prepared using the accrual basis of accounting. The policies applied in these financial statements are based on IFRS in effect as of April 30, 2026. The notation “$” represents Canadian dollars and “US$” represents US dollars. These financial statements were approved by the Board of Directors on August 25, 2026. The material accounting policies used in the preparation of these financial statements are as follows: Financial assets and liabilities a) Classification The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that
Page 10
Highcliff Metals Corp. Notes to the Financial Statements For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) 10 are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument -by-instrument basis) to designate them at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL. The following table shows the classification under IFRS 9: Financial assets/liabilities Classification Cash Financial asset at amortized cost Receivables Financial asset at amortized cost Tax indemnity agreement Fair value through profit or loss Accounts payable and accrued liabilities Financial liability at amortized cost Other tax liability Financial liability at amortized cost b) Measurement Financial assets at FVTOCI Elected investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses recognized in other comprehensive income (loss). Financial assets and liabilities at amortized cost Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment. Financial assets and liabilities at FVTPL Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statements of loss and comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the statements of loss and comprehensive loss in the period in which they arise. c) Impairment of financial assets at amortized cost The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the statements of loss and comprehensive loss as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized. d) Derecognition The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the statements of net (loss) income. However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive income (loss) or are recycled to (loss) income.
Page 11
Highcliff Metals Corp. Notes to the Financial Statements For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) 11 The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non -cash assets transferred or liabilities assumed, is recognized in the statements of loss and comprehensive loss. Share capital Common shares are classified as equity. Transaction costs directly attributable to the issue of common shares are recognized as a deduction from equity. Expired warrants are reclassified to contributed surplus. The Company has adopted a residual method with respect to the measurement of shares and warrants issued as units. The residual method first allocates fair value to the component with the best evidence of fair value and then the residual value, if any, to t he less easily measurable component. The fair value of the common shares issued was determined to be the component with the best evidence of fair value. The balance, if any, was allocated to the attached warrants. Income taxes Income tax on the income or loss for the periods presented comprises current and deferred tax. Income tax is recognized in income 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 expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous periods. Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Company does not provide for temporary differences relating to differences relating to investments in subsidiaries, associates, and joint ventures to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet reporting date applicable to the period of expected realization or settlement. A deferred tax asset is recognized only to the extent that it is probable that future taxable incomes will be available against which the asset can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets agains t current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Basic and diluted loss per share Basic earnings or loss per share represents the income or loss for the period, divided by the weighted average number of common shares outstanding during the period. Diluted earnings or loss per share represents the income or loss for the period, divided b y the weighted average number of common shares outstanding during the period plus the weighted average number of dilutive shares resulting from the exercise of stock options, warrants and other similar instruments where the inclusion of these would not be anti-dilutive.
Page 12
Highcliff Metals Corp. Notes to the Financial Statements For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) 12 Foreign currencies Functional currency is the currency of the primary economic environment in which an entity operates. The functional currency and presentation currency of the Company is Canadian dollars. Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. Non -monetary assets and liabilities that are stated at fair value are translated using the historical rate on the date that the fair value was determined. All gains and losses on translation of these foreign currency transactions are charged to the statement of loss. Share-based payments The fair value of all stock options granted is recorded as a charge to operations with a credit to contributed surplus. The fair value of the stock options is recorded to share-based payments expense over the vesting period. Stock options granted are measured at their fair value on the grant date. Warrants issued to brokers are measured at their fair value on the grant date and are recognized as a deduction from equity and credited to contributed surplus. The fair value of stock options and warrants are estimated using the Black-Scholes option pricing model. Any consideration received on the exercise of stock options or warrants together with the related portion of contributed surplus is credited to share capital. 4. NEW ACCOUNTING STANDARDS AND PRONOUNCEMENTS Certain accounting standards or amendments to existing accounting standards that have been issued that are not mandatory for the current period and have not been early adopted. Amendments to IFRS 9 and IFRS 7 - Amendments to the Classification and Measurement of Financial Instruments In May 2024, the International Accounting Standards Board (“IASB”) issued Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 and IFRS 7). These amendments updated classification and measurement requirements in I FRS 9 Financial Instruments and related disclosure requirements in IFRS 7 Financial Instruments: Disclosures. The IASB clarified the recognition and derecognition date of certain financial assets and liabilities, and amended the requirements related to settling financial liabilities using an electronic payment system. It also clarified how to assess the contractual cash flow characteristics of financial assets in determining whether they meet the solely payments of principal and interest criterion, includin g financial assets that have environmental, social and corporate governance (“ESG”)-linked features and other similar contingent features. The IASB added disclosure requirements for financial instruments with contingent features that do not relate directly to basic lending risks and costs and amended disclosures relating to equity instruments designated at fair value through other comprehensive income. The amendments are effective for annual periods beginning on or after January 1, 2026, with early application permitted. Management does not expect a material effect of these amendments on the Company’s financial statements. IFRS 18 – Presentation and Disclosure in Financial Statements In April 2024, the IASB issued IFRS 18, Presentation and Disclosure of Financial Statements (IFRS 18), which replaces IAS 1, Presentation of Financial Statements. IFRS 18 introduces a specified structure for the income statement by requiring income and ex penses to be presented into the three defined categories of operating, investing and financing, and by specifying certain defined totals and subtotals. Where company -specific measures related to the income statement are provided, IFRS 18 requires companies to disclose explanations around these measures, which are referred to as management-defined performance measures. IFRS 18 also provides additional guidance on principles of aggregation and
Page 13
Highcliff Metals Corp. Notes to the Financial Statements For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) 13 disaggregation which apply to the primary financial statements and the notes. Retrospective application is required, and early application is permitted. The standard is effective for annual reporting periods beginning on or after January 1, 2027, with early application permitted. Management is currently assessing the effect of the standard on the Company’s financial statements. 5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of the financial statements requires management to use judgement in applying its accounting policies and estimates and assumptions about the future. Estimates and other judgements are continuously evaluated and are based on management’s experience and other factors, inclu ding expectations about future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Critical accounting estimates and judgements: (i) The assumption that the Company is a going concern and will continue in operation for the foreseeable future and at least one year. The factors considered by management are disclosed in Note 2. (ii) The estimated value of the potential withholding tax liability and related tax indemnity asset as disclosed in Note 6. The Company estimated the fair value of the tax indemnity asset to be equal to ninety percent of the book value of the withholding tax liability. This estimate requires considerable judgement, as there is no observable market for an indemnification asset such as this. The value is subject to variability, as the Company is reliant on the Lender to abide by the term of the indemnification agreement. There are collection risks associated with the tax indemnity agreement, that may impact the fair value of the asset. 6. TAX INDEMNITY AGREEMENT The Company had promissory notes due to BV Lending, LLC, a company controlled by a former director of the Company (the “Lender”). The promissory notes began on September 19, 2012 and were amended numerous times to increase the amount of principal available under the promissory notes and to extend the maturity date. Prior to April 30, 2021, the interest rate was between 12 -14% per annum and since May 1, 2021 the interest rate was 0.13% per annum. The final amending agreement extended the maturity date to March 10, 2023. The promissory notes were collateralized by the Company’s Helmer -Bovill Property. On March 6, 2023, the promissory notes and accrued interest of US$36,186,579 ($49,268,028) were settled as part of the sale of subsidiary transaction, which included the Helmer-Bovill Property. The Company determined that accrued interest on the promissory notes may be subject to withholding taxes as the Lender controlled over 25% of the common shares of the Company and the Company’s debt to equity ratio exceeded certain statutory limits that caused interest expense deductibility to be partially restricted. Any withholding taxes payable would be based on the amount of restricted interest, when such interest is paid or at the end of a fiscal year. As at April 30 , 202 6, the Company had recorded accrued withholding tax on the deemed dividends of US$896,756 ($1,221,740) (2025: US$896,756 ($1,238,599)) and accrued penalties and interest of US$530,796 ($723,157) (2025: US$466,529 ($644,368)). As at April 30, 2026, the balance of any potential withholding tax liability including penalties and interest was US$1,427,552 ($1,944,897) (2025: US$1,363,285 ($1,882,967)). On July 28, 2022, the Company entered into a Tax Indemnity Agreement with the Lender transferring the obligation to pay the tax liability from the Company to the Lender, whereby the Lender agreed to administer and pay any liability arising from any Canada Revenue Agency (“CRA”) inquiry. The v alue of the Tax Indemnity Agreement is the same as the potential withholding taxes, penalties and interest. The Company remains responsible for potential CRA liability and there is a risk associated with the Tax Indemnity Agreement.
Page 14
Highcliff Metals Corp. Notes to the Financial Statements For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) 14 The Company is reliant on the Lender to reimburse the Company for any potential liability to the CRA . The Company has recorded the Tax Indemnity Agreement fair value as ninety percent of the value of the potential withholding taxes, penalties and interest. The estimated collectability risk is a significant judgement and estimate (Note 5). During the year ended April 30, 2026, the Company recorded interest of US$64,267 ($88,688) (2025 – US$79,214 ($110,332)). During the year ended April 30, 2026, the Company recorded a change in fair value of Tax Indemnity Agreement of US$57,840 ($79,819) (2025 – US$7,090 ($10,667)). At April 30, 2026, the fair value of the Tax Indemnity Agreement was US$ 1,284,797 ($1,750,407) (2025 – US$1,226,957 ($1,694,671)). 7. SHARE CAPITAL a) Authorized Unlimited number of common shares, without par value. The holders of common shares are entitled to receive dividends which are declared from time to time, and are entitled to one vote per share at meetings of the Company. All shares are ranked equally with regards to the Company’s residual assets. b) Share consolidation Effective April 14, 2025, the Company consolidated its common shares on the basis of one new common share for every four old common shares issued and outstanding at that time. All references to share and per share amounts in these financial statements have been retroactively restated to reflect the share consolidation. c) Financings During the year ended April 30, 2026, the Company completed the following equity financings: • On June 30, 2025, the Company completed a non-brokered private placement of 4,166,598 common shares at price of $0.06 per share for gross proceeds of $249,996. The Company incurred $ 6,936 in share issuance costs, which are attributable to legal costs and filing fees to complete the private placement. During the year ended April 30, 2025, the Company completed the following equity financings: • On July 26, 2024, the Company completed a non-brokered private placement of 2,325,000 common shares at price of $0.06 per share for gross proceeds of $139,500. The Company incurred $3,988 in share issuance costs, which are attributable to legal costs and filing fees to complete the private placement. d) Stock options The Company has an established Stock Option Plan (the “Plan”) for when it grants stock options. The Plan provides that the directors of the Company may grant options to purchase common shares to directors, officers, employees and service providers of the Company on terms that the directors of the Company may determine are within the limitations set forth in the Plan. The maximum number of shares available under the Plan is limited to 10% of the issued common shares. The maximum term of stock options is ten years. All stock options vest on the date of grant, unless otherwise stated. As at April 30, 2026, the Company had 883,486 stock options available for grant pursuant to the Plan (2025 – 466,827). As at April 30, 2026 and 2025, the Company did not have outstanding and exercisable options.
Page 15
Highcliff Metals Corp. Notes to the Financial Statements For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) 15 e) Basic and diluted loss per share During the year ended April 30, 2026, the potentially dilutive common shares totaling nil (2025 – nil) were not included in the calculation of basic and diluted loss per share because their effect was anti-dilutive. 8. RELATED PARTY TRANSACTIONS During the year ended April 30, 2026, $10,178 (2025 - $16,910) was charged by Malaspina Consultants Inc. for the services of Matt Anderson, CFO, and are included in professional fees. Included in accounts payable and accrued liabilities are amounts owed to directors or officers or companies controlled by them. As at April 30, 2026, the amount was $10,194 (2025 - $26,658). All amounts are non-interest bearing, unsecured, and due on demand. 9. INCOME TAX A reconciliation of the income tax provision computed at statutory rates to the reported income tax provision for the years ended April 30, 2026 and 2025 is as follows: 2026 $ 2025 $ Statutory tax rate 27% 27% Loss before income taxes (98,505) (167,921) Expected income tax (recovery) expense (27,000) (45,000) Increase (decrease) in income tax recovery resulting from: Other permanent differences 2,000 26,000 Share issue costs (2,000) - Impact of under provision in previous year (34,000) 1,000 Change in unrecognized deferred tax assets 61,000 18,000 Income tax recovery (expense) - - The significant components of the Company’s deferred income tax assets and liabilities after applying enacted corporate tax rates as at April 30, 2026 and 2025 are as follows: 2026 $ 2025 $ Deferred income tax assets / (liabilities) Operating losses carried forward 249,000 221,000 Share issuance costs 2,000 1,000 Capital losses and other 2,040,000 2,008,000 Total unrecognized deferred tax assets (2,291,000) (2,230,000) Net deferred income tax assets - -
Page 16
Highcliff Metals Corp. Notes to the Financial Statements For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) 16 At April 30, 202 6, the Company has accumulated non -capital losses $924,000 (2025 - $820,000) which are available to carryforward and offset future years’ taxable income. The loss will expire in years from 2043 to 2046. The Company has recorded management’s estimate of a potential withholding tax liability (Note 6). The amount determined to be payable upon review by the taxation authorities may vary materially from this current estimate. 10. FINANCIAL INSTRUMENTS Management of Capital The Company’s objectives when managing capital are: to safeguard the Company’s ability to continue as a going concern in order to facilitate the development of its mineral properties and to maintain an optimal capital structure, while ensuring the Company’s strategic objectives are met; and to provide an appropriate return to shareholders relative to the risk of the Company’s underlying assets. The capital structure of the Company consists of equity attributable to common shareholders, comprised of share capital, contributed surplus and deficit. The Company maintains and adjusts its capital structure based on changes in economic conditions and the Company’s planned requirements. The Company may adjust its capital structure by issuing new equity, issuing new debt, or acquiring or disposing of assets, and by controlling the capital expenditures program. The Company has no operating business. As such, the Company is dependent on external financing to develop a business and fund its activities. In order to carry out its planned activities and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed and if available. Management reviews its capital management approach on an ongoing basis. At April 30, 2026 and 2025, the Company was not subject to any externally imposed capital requirements. Classification of Financial Instruments The Company’s financial instruments consist of cash , tax indemnity agreement, accounts payable and accrued liabilities, and other tax liability. The Company’s cash, accounts payable and accrued liabilities and other tax liability are measured at amortized cost. The tax indemnity agreement is measured at fair value through profit or loss. Fair Value of Financial Instruments Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy based on the degree to which the inputs used to determine the fair value are observable. The three levels of the fair value hierarchy are: Level 1 – Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets. Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in market that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 – Unobservable inputs which are supported by little or no market activity. The tax indemnity agreement is considered to be a Level 2 financial instrument on the fair value hierarchy as it is observable against the value of the other tax liability.
Page 17
Highcliff Metals Corp. Notes to the Financial Statements For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) 17 The fair value of cash, accounts payable and accrued liabilities and other tax liability approximate their book value due to the short-term nature of these financial liabilities. The fair value of the tax indemnity agreement is determined by reference to the value of the potential withholding tax liability. Discussions of risks associated with financial assets and liabilities are detailed below: Credit Risk Credit risk arises from cash held with banks and financial institutions. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The Company’s cash is primarily held with a large Canadian bank. Commodity Price Risk The Company’s ability to raise capital to fund exploration or development activities is subject to risks associated with fluctuations in the market price of minerals under exploration. Liquidity Risk Liquidity risk is the risk that the Company will not have sufficient funds to meet its financial obligations when they are due. The Company manages liquidity risk by maintaining sufficient cash and cash equivalent balances to enable settlement of transactions on the due date. Management monitors the Company’s contractual obligations and other expenses to ensure adequate liquidity is maintained. Refer to the going concern note for additional disclosure (Note 2). As at April 30, 202 6 and 2025, the Company had working capital as follows: 2026 $ 2025 $ Current assets 1,857,005 1,704,672 Current liabilities (1,993,966) (1,986,188) Working capital deficiency (136,961) (281,516) Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and price risk. a) Currency Risk As at April 30, 20 26, all of the Company’s cash was held in Canadian dollars, the Company’s functional currency. The Company has no operations in foreign jurisdictions outside of Canada at this time and as such has no currency risk associated with its operations. The Company has nominal amounts of payables in US dollars. b) Interest Rate Risk Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from interest bearing financial assets and liabilities that the Company uses. As the Company has no interest bearing financial instruments, the Company is not exposed to interest rate risk.
Page 18
Highcliff Metals Corp. Notes to the Financial Statements For the years ended April 30, 2026 and 2025 (Expressed in Canadian dollars) 18 c) Price Risk Price risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market prices. The Company has no financial instruments subject to price risk. 11. SUBSEQUENT EVENTS • On July 20, 2026, the Company completed a non-brokered private placement of 8,235,758 common shares at a price of $0.085 per share for gross proceeds of $700,039.