Financial statements
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Condensed Interim Consolidated Financial Statements Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian Dollars) (Unaudited)
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NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditor. The accompanying unaudited condensed consolidated interim financial statements of Hillcrest Energy Technologies Ltd. for the six months ended June 30, 2026, have been prepared by the management of the Company and approved by the Company’s Audit Committee and the Company’s Board of Directors. The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.
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TABLE OF CONTENTS Condensed Interim Consolidated Statements of Financial Position 1 Condensed Interim Consolidated Statements of Loss and Comprehensive Loss 2 Condensed Interim Consolidated Statements of Cash Flows 3 Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity 4 Notes to the Condensed Interim Consolidated Financial Statements 5 - 18
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HILLCREST ENERGY TECHNOLOGIES LTD. Condensed Interim Consolidated Statements of Financial Position (Expressed in Canadian Dollars) 1 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements June 30 December 31, Notes 2026 2025 ASSETS (unaudited) (audited) Current assets Cash and cash equivalents $ 70,519 $ 58,655 Receivables 29,731 113,555 Due from related parties 9 1,394 14,447 Prepaid expenses 290,424 51,074 Right-of-use asset 6 105,485 105,485 Assets of discontinued operations 16 442. 780 Total current assets 497,995 343,996 Non-current assets Restricted cash equivalents 28,750 28,750 Right-of-use asset 6 27,596 80,338 Intangible assets 4 1,550,000 1,550,000 Property and equipment 5 11,235 35,918 Deposits 35,913 28,137 TOTAL ASSETS $ 2,151,489 $ 2,067,139 LIABILITIES AND SHAREHOLDERS' DEFICIENCY Current liabilities Accounts payable and accrued liabilities 7 $ 1,667,501 $ 3,430,409 Lease liability 6 97,575 118,791 Convertible debentures 8 115,452 2,050,452 Promissory notes -. 242,000 Liabilities of discontinued operations 16 446,630 462,817 Total current liabilities 2,327,158 6,304,469 Lease liability 6 76,962 111,549 TOTAL LIABILITIES 2,404,120 6,416,018 SHAREHOLDERS’ DEFICIENCY Share capital 10 56,246,571 47,939,754 Share subscriptions receivable -.. (8,000) Convertible debentures - equity component 8 17,913 363,142 Securities subscribed -.. 174,200 Contributed surplus 10,289,665 8,109,092 Reserves 318,854 310,228 Deficit (67,125,634) (61,237,295) TOTAL SHAREHOLDERS’ DEFICIENCY (252,631) (4,348,879) TOTAL LIABILITIES & SHAREHOLDERS’ DEFICIENCY $ 2,151,489 $ 2,067,139 Nature of operations and going concern (Note 1) Commitments (Note 11) Subsequent events (Note 17) On behalf of the Board of Directors: “Raylene Whitford” “Michael Moskowitz” Director Director
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HILLCREST ENERGY TECHNOLOGIES LTD. Condensed Interim Consolidated Statements of Loss and Comprehensive Loss For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian Dollars) 2 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements Six Months Ended June 30, Notes 2026 2025 General and administrative expenses Management and consulting 9 $ 271,334 $ 114,790 Research and development 1,488,601 1,264,162 Office and general 12 1,384,767 1,894,663 Share-based compensation 9, 10 2,673,912 466,238 $ 5,818,614 $ 3,739,853 Loss from operations (5,818,614) (3,739,853) Financing expenses (19,252) (155,658) Foreign exchange loss (45,850) (4,482) Other income 328 4,867 Net loss for the period from continuing operations $ (5,883,388) $ (3,895,126) Net loss from discontinued operations 16 (4,951) (2,746) Total net loss for the period $ (5,888,339) $ (3,897,872) Items that may be subsequently reclassified to net loss Exchange differences on translating foreign operations - (36,219) Net loss and comprehensive loss for the period $ (5,888,339) $ (3,934,091) Basic and diluted loss per share from continuing operations $ (0.03) $ (0.04) Basic and diluted loss per share from discontinued operations $ (0.00) $ (0.00) Weighted average common shares outstanding: Basic 195,499,875 99,878,607 Diluted 195,499,875 99,878,607
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HILLCREST ENERGY TECHNOLOGIES LTD. Condensed Interim Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian Dollars) 3 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements Six Months Ended June 30, Notes 2026 2025 OPERATING ACTIVITIES Net loss from continuing operations $ (5,883,388) $ (3,897,872) Adjusted for items not involving cash: Financing expenses 34,965 30,529 Depreciation 77,425 139,746 Share-based compensation 2,673,912 466,238 Changes in non-cash working capital items: Receivables 83,824 (9,672) Prepaid expenses (239,350) 755,247 Due from related party 13,053 - Accounts payable and accrued liabilities (1,085,624) 1,143,149 Cash used in operating activities for continuing operations (4,325,183) (1,372,635) Cash used in operating activities for discontinued operations (20,800) 8,196 Cash used in operating activities (4,345,983) (1,364,439) FINANCING ACTIVITIES Proceeds received for private placements 10 4,802,128 - Repayment of promissory notes (206,000) - Share issuance costs 10 (20,063) - Repayment of lease liability 6 (76,557) (73,925) Securities subscribed (174,200) - Exercise of warrants 10 32,539 - Promissory notes - (1,178,056) Debentures - 2,606,748 Cash from financing activities for continuing operations 4,357,847 1,354,767 Cash from financing activities 4,357,847 1,354,767 Net increase (decrease) in cash 11,864 (9,672) Cash and cash equivalents, beginning of the period 58,655 15,582 Cash and cash equivalents, end of the period $ 70,519 $ 5,910
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HILLCREST ENERGY TECHNOLOGIES LTD. Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian Dollars) 4 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements Share Capital Reserves Notes Number of Shares Amount Share Subscriptions Receivable Securities Subscribed Contributed Surplus Equity Component of Convertible Debentures Warrants Foreign Currency Translation Deficit Shareholders' Equity (Deficiency) Balance, December 31, 2024 99,269,584 43,980,719 (8,000) - 8,581,776 - 190,330 119,898 (53,972,066) (1,107,343) Exercise of RSUs 1,166,666 127,167 - - (127,167) - - - - - Issuance of convertible debentures - - - - - 1,479,779 - - - 1,479,779 Share-based compensation - - - - 466,238 - - - - 466,238 Net loss and comprehensive loss for the period - - - - - - - - (3,897,872) (3,897,872) Balance, June 30, 2025 100,436,250 44,107,886 (8,000) - 8,920,847 1,479,779 190,330 119,898 (57,869,938) (3,059,198) Balance, December 31, 2025 132,692,506 47,939,754 (8,000) 174,200 8,109,092 363,142 190,330 119,898 (61,237,295) (4,348,879) Exercise of warrants 271,150 32,538 - - - - - - - 32,538 Redemption of RSUs 2,276,739 493,339 - - (493,339) - - - - - Return to Treasury (84,648) (15,237) - - - - - - - (15,237) Private placements 48,444,764 4,838,128 - (174,200) - - - - - 4,663,928 Shares subscription received - - 8,000 - - - - - - 8,000 Debenture conversions 22,036,845 2,462,439 - - - (345,229) - - - 2,117,210 Shares issued for services 2,912,772 524,299 - - - - - - - 524,299 Share-based compensation - - - - 2,673,912 - - - - 2,673,912 Shares issuance costs - (28,689) - - - - 8,626 - - (20,063) Net loss and comprehensive loss for the period - - - - - - - - (5,888,339) (5,888,339) Balance, June 30, 2026 208,550,128 56,246,571 - - 10,289,665 17,913 198,956 119,898 (67,125,634) (252,631)
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 5 1. NATURE OF OPERATIONS AND GOING CONCERN Hillcrest Energy Technologies Ltd. (formerly “Hillcrest Petroleum Ltd.”) (the “Company”) was incorporated on May 2, 2006 under the Business Corporations Act of British Columbia, and is in the business of developing high-value, high- performance clean energy technologies. The Company is currently engaged in a variety of R&D activities associated with its Zero Voltage Switching (ZVS) technology platform and commercializing projects associated with specific applications being developed on the ZVS technology platform. The Company’s registered office is Suite 1170 – 1040 West Georgia Street, Vancouver, BC, V6E 4H1. On March 30, 2021, the Company delisted from the TSX Venture Exchange and listed on the Canadian Securities Exchange (“CSE”), trading under the symbol “HEAT”. Concurrent with the new listing on the CSE, the Company changed its name from Hillcrest Petroleum Ltd. to Hillcrest Energy Technologies Ltd. The Company is subject to several categories of risk associated with the development of clean energy technologies. Among the factors that have a direct bearing on the Company’s prospects are uncertainties inherent in technology product development; intellectual property risks including litigation; access to additional capital; availability and cost of services and equipment; and the presence of competitors with greater financial resources and capacity. These condensed interim consolidated financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. The Company’s ability to meet its obligations as they fall due and to continue to operate as a going concern is dependent on the continued financial support of its creditors and its shareholders and ultimately, the attainment of profitable operations. There is no certainty that the Company will continue to produce revenue as it transitions from oil and gas production and into clean energy technology development and commercialization. Revenue may not be achieved from the technology portfolio in the near term. In the past, the Company has relied on sales of equity securities, debt instruments and asset sales to meet its cash requirements. There can be no assurance that funding from this or other sources will be sufficient in the future to satisfy operational requirements and cash commitments. Even if the Company is able to obtain new financing, it may not be on commercially reasonable terms or terms that are acceptable to it. Failure to obtain such financing on a timely basis could cause the Company to reduce or terminate its operations. Due to the conditions and events as noted above, there is material uncertainty casting significant doubt on the Company’s ability to continue as a going concern. These condensed interim consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments could be material. 2. BASIS OF PREPARATION (a) Statement of Compliance These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) applicable to the preparation of interim financial statements including International Accounting Standard 34: Interim Financial Reporting and follow the same accounting policies and methods of application as the Company’s most recent annual financial statements. These condensed interim consolidated financial statements were approved by the Audit Committee and the Board of Directors of the Company on August 24, 2026. (b) Basis of Measurement The condensed interim consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments carried at fair value.
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 6 2. BASIS OF PREPARATION (continued) (c) Basis of Consolidation These condensed interim consolidated financial statements include the accounts of the parent company, Hillcrest Energy Technologies Ltd., and its wholly owned subsidiaries. Intercompany balances and transactions, and any unrealized income and expenses arising from intercompany transactions, are eliminated in preparing the consolidated financial statements. Name of Subsidiary Jurisdiction of Incorporation Principal Activity Hillcrest Exploration Ltd. (“HEL”) USA Oil and Gas exploration Hillcrest Energy Technologies Royalty Holdings Ltd. (“ANIGO”) Canada Clean Technology Hillcrest Energy Technologies Holdings Ltd. Canada Clean Technology Hillcrest Energy Technologies Operating Ltd. Canada Clean Technology 102031850 Saskatchewan Ltd. Canada Oil and Gas exploration (d) Functional and Presentation Currency These condensed interim consolidated financial statements are presented in Canadian dollars. The functional currency of the parent, ANIGO, and 102031850 Saskatchewan Ltd. is the Canadian dollar. The functional currency of HEL is the United States dollar. (e) Use of Estimates and Judgments In preparing these condensed interim consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ. Significant judgements made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those applied in the most recent annual audited consolidated financial statements for the year ended December 31, 2025. 3. SIGNIFICANT ACCOUNTING POLICIES These condensed interim consolidated financial statements, including comparatives, have been prepared in accordance with International Accounting Standards (“IAS”) 34, “Condensed Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). The accounting policies applied in these condensed interim consolidated financial statements are consistent with those stated in the Company’s most recent annual audited financial statements, except for any new standards and amendments adopted. Accordingly, these condensed interim consolidated financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2025. 4. INTANGIBLE ASSETS On April 7, 2021, the Company acquired all of the issued and outstanding shares in the capital of ANIGO Technologies Inc. (“ANIGO”), now named Hillcrest Energy Technologies Royalty Holdings Ltd., an engineering product development company in the business of developing proven electric machine control software intellectual property (“IP”). The aggregate purchase price of $1,550,000 for ANIGO was comprised of a cash consideration of $200,000 and the issuance of 6,000,000 common shares of the Company at a price of $0.225, for a fair value of $1,350,000. The Company, through ANIGO, acquired a portfolio of software IP. Management determined all the consideration issued was attributable to the software IP acquired. Since then, the Company acquired tangible assets in connection with the development of its intangible assets and related business activities, and these have been capitalized within property, plant and equipment ("PP&E"). Other costs incurred in this connection but not related to the acquisition of PP&E, are expensed as research and development. During the period ended June 30, 2026, the Company reviewed the carrying value of its intangible assets and determined there were no indicators of impairment with respect to it.
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 7 5. PROPERTY, PLANT AND EQUIPMENT R&D Equipment IT Infrastructure Equipment and Other Total Cost At December 31, 2025 $ 634,216 $ 86,317 $ 103,254 $ 823,787 Additions - 4,594 - 4,594 At June 30, 2026 $ 634,216 $ 90,911 $ 103,254 $ 828,381 Accumulated Depreciation At December 31, 2025 $ 604,162 $ 85,100 $ 98,607 $ 787,869 Depreciation 24,249 1,727 3,301 29,277 At June 30, 2026 $ 628,411 $ 86,827 $ 101,908 $ 817,146 Net book value At December 31, 2025 $ 30,054 $ 1,217 $ 4,647 $ 35,918 At June 30, 2026 $ 5,805 $ 4,084 $ 1,346 $ 11,235 Equipment and other includes leasehold improvements of $67,019 (December 31, 2025 - $67,019) with accumulated depreciation of $67,019 (December 31, 2025 - $67,019). 6. RIGHT-OF-USE ASSET/LEASE LIABILITY On July 19, 2021, the Company entered into an office and warehouse rental agreement in Vancouver, British Columbia with a term of 36 months, commencing September 1, 2021 and terminating on August 31, 2024, to develop its clean energy technology and IP. Pursuant to this agreement, the Company has a commitment to lease the technology research and development space at a base rent rate of $47,209 per annum, plus common costs and taxes. In July 2024, the Company extended this lease for a further 36-month term, commencing September 1, 2024, and terminating August 31, 2027 at base rent rates of $61,094 and $63,871 per annum for the years ended August 31, 2026, and 2027, respectively, plus common costs and taxes. The first agreement is a sublet agreement with a term of 11 months, commencing December 1, 2023, and terminating on October 31, 2024, to accommodate the Company’s corporate operations. Pursuant to this agreement, the Company has a commitment to lease office space at a base rent rate of $77,097 per annum, plus common costs and taxes. The second agreement has a term of 36 months, commencing November 1, 2024, and terminating on October 31, 2027, to accommodate the Company’s corporate operations. Pursuant to this agreement, the Company has a commitment to lease office space at base rent rates of $92,019, and $94,506 per annum for the years ended October 31, 2026 and 2027, respectively, plus common costs and taxes. a) Right-of-use assets continuity Changes in the Company’s right-of-use assets during the six months ended June 30, 2026 and year ended December 31, 2025 were as follows: June 30, 2026 December 31, 2025 $ $ Balance, beginning of period 185,823 291,308 New premises lease - - Amortization (52,742) (105,485) Balance, end of period 133,081 185,823
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 8 6. RIGHT-OF-USE ASSET/LEASE LIABILITY (continued) b) Lease liability Minimum lease payments in respect of lease liabilities and the effect of discounting as at June 30, 2026, and December 31, 2025 were as follows: June 30, 2026 December 31, 2025 $ $ Undiscounted minimum lease payments: Less than one year 155,769 154,453 One to three years 81,741 121,336 Three to five years - - Effect of discounting (62,973) (45,449) Present value of minimum lease payments 174,537 230,340 c) Lease liability continuity Changes in the Company’s lease liabilities during the six months ended June 30, 2026, and year ended December 31, 2025 were as follows: June 30, 2026 December 31, 2025 $ $ Balance, beginning of period 230,340 323,023 Interest expense 20,754 56,506 Principal payments (76,557) (149,189) Balance, end of period 174,537 230,340 Interest of $20,754 for the six months ended June 30, 2026 (June 30, 2025 – $30,529) is included in financing expenses. 7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES June 30, 2026 December 31, 2025 $ $ Trade payables 1,250,307 2,919,861 Accrued interest - 202,902 Payroll liabilities 14,680 265,646 Accrued liabilities 402,514 42,000 Balance, end of period 1,667,501 3,430,409
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 9 8. CONVERTIBLE DEBENTURES A reconciliation of the convertible debentures is provided below: Liability Component Equity Component Total ($) ($) ($) Balance, December 31, 2024 - - - Issuance 2,188,596 418,152 2,606,748 Accretion 162,524 - 162,524 Settlement in units (191,491) (34,886) (226,377) Conversions (109,177) (20,124) (129,301) Balance, December 31, 2025 2,050,452 363,142 2,413,594 Conversions (1,937,265) (345,229) (2,282,494) Accretion 2,265 - 2,265 Balance, June 30, 2026 115,452 17,913 133,365 On January 29, 2025, the Company closed a private placement of convertible debentures (“debentures”) with a principal value of $1,942,825. The debentures bear 10% interest per annum, mature on January 29, 2027, and are unsecured. Debentures are convertible at the option of the holder up to the maturity date or at the option of the Company on the maturity date only, including the right of full conversion of the entire principal and accrued interest into Company units at a value of $0.12 per unit, with each unit consisting of one common share and one common share purchase warrant exercisable at a price of $0.12 for three years following the conversion date. The convertible debenture was determined to be a compound financial instrument composed of liability and equity components, meeting the fixed-for-fixed criteria. The fair value of the liability component of the convertible debentures at the time of issue was calculated as being equivalent to the discounted cash flows for the debentures assuming an effective interest rate of 22%. The effective interest rate was based on the estimated interest rate for a debenture without a conversion feature. The fair value of the equity component (conversion feature) was determined at the time of issue as the difference between the face value of the convertible debenture and the fair value of the liability component. At the time of issuance, the value of the liability component was determined to be $1,625,649, with a residual value of $317,176 assigned to the equity component. On March 4, 2025, the Company closed a private placement of convertible debentures (“debentures”) with a principal value of $663,923. The debentures bear 10% interest per annum, mature on January 29, 2027, and are unsecured. Debentures are convertible at the option of the holder up to the maturity date or at the option of the Company on the maturity date only, including the right of full conversion of the entire principal and accrued interest into Company units at a value of $0.12 per unit, with each unit consisting of one common share and one common share purchase warrant exercisable at a price of $0.12 for three years following the conversion date. The convertible debenture was determined to be a compound financial instrument composed of liability and equity components, meeting the fixed-for-fixed criteria. The fair value of the liability component of the convertible debentures at the time of issue was calculated as being equivalent to the discounted cash flows for the debentures assuming an effective interest rate of 22%. The effective interest rate was based on the estimated interest rate for a debenture without a conversion feature. The fair value of the equity component (conversion feature) was determined at the time of issue as the difference between the face value of the convertible debenture and the fair value of the liability component. At the time of issuance, the value of the liability component was determined to be $562,947, with a residual value of $100,976 assigned to the equity component. During the six months ended June 30, 2026, convertible debentures with a principal value of $2,146,820 and $179,944 of interest accrued on those debentures was converted into 22,036,845 units at a value of $0.12 per unit at the holders’ option. $135,674 of accretion added to the book value of the convertible debentures was also reclassified to share capital upon conversion.
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 10 8. CONVERTIBLE DEBENTURES (continued) During the year ended December 31, 2025, convertible debentures with a principal value of $123,000 and $9,584 of interest accrued on those debentures was converted into 1,104,869 units at a value of $0.12 per unit at the holders’ option. $6,302 of accretion added to the book value of the convertible debentures was also reclassified to share capital upon conversion. During the year ended December 31, 2025, convertible debentures with a principal value of $215,400 and $15,275 of interest accrued on those debentures was settled for 2,563,056 units at a value of $0.09 per unit, with each unit consisting of one common share and one common share purchase warrant exercisable at a price of $0.12 for a period of two years following the conversion date. The Company recognized a $10,977 gain on settlement, representing the difference between the value of the settlement units and the book value of the convertible debentures and interest payable balances settled, resulting from accretion added to the book value of the convertible debentures during the year ended December 31, 2025. 9. RELATED PARTY TRANSACTIONS The following summarizes the Company’s related party transactions during the six months ended June 30, 2026 and 2025. Key management personnel included the Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and directors and officers and companies controlled or significantly influenced by them: Key management compensation Six Months Ended June 30, 2026 June 30, 2025 ($) ($) Management salaries, consulting fees and bonuses paid or accrued to officers or corporations controlled by officers of the Company 376,039 309,719 Director fees paid or accrued to directors 75,292 70,100 Share-based compensation 2,261,448 272,291 2,712,779 652,110 a) As at June 30, 2026, the Company was owed $1,394 (December 31, 2025 - $14,447) from directors of the Company. These amounts are non-interest bearing and are due on demand. b) As at June 30, 2026, the Company was owed nil (December 31, 2025 - $8,000) included in share subscriptions receivable from an officer of the Company. This amount is non-interest bearing and due on demand. c) As at June 30, 2026, a total of $173,748 (December 31, 2025 - $330,699) was included in accounts payable and accrued liabilities for consulting fees, director fees, reimbursable expenses and GST payable to Company directors and officers. d) During the six months ended June 30, 2026, the Company settled $116,899 (December 31, 2025 – nil) of accrued director fees owing to four directors through the issuance of 649,440 units at a deemed price of $0.18 per unit. Each unit consisted of one common share and one share purchase warrant. Each warrant entitles the holder to acquire one additional common share at an exercise price of $0.20 per share for a period of 12 months from the date of issuance. See Note 10. 10. SHARE CAPITAL Authorized Unlimited number of common shares without par value Issued and outstanding As at June 30, 2026, the Company had 208,550,128 (December 31, 2025 – 132,692,506) common shares issued and outstanding. Six Months Ended June 30, 2026 a) On January 9, 2026, the Company closed the final tranche of a private placement, raising aggregate gross proceeds of $4,593,119 at a price of $0.09 per unit, consisting of: (i) $3,642,880 in gross proceeds from the
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 11 10. SHARE CAPITAL (continued) issuance of 40,476,444 units on a private placement basis; and (ii) $950,239 in deemed gross proceeds through the issuance of 10,558,210 units upon the conversion of outstanding convertible debentures held by a creditor. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to acquire one additional common share at an exercise price of $0.12 per share for a period of two years from the date of issuance. b) On April 6, 2026, the Company issued 2,912,731 units at $0.18 per unit for the aggregate amount of $524,292 in previously accrued debt being settled. Each unit consists of one common share and one share purchase warrant. Each warrant entitles the holder to purchase an additional share at a price of $0.20 per Warrant Share for a period of 12 months following the date of issuance. $116,899 was settled in connection with previously accrued fees owing to four directors of the Company. c) On June 16, 2026, the Company closed a private placement of 7,968,319 units at a price of $0.15 per unit for gross proceeds of $1,195,248. Each unit consists of one common share and one common share purchase warrant, with each warrant entitling the holder to acquire one additional common share at an exercise price of $0.20 per share for a period of 24 months from the date of issuance. In connection with the offering, the Company paid cash finder's fees of $20,000 and issued 133,333 finder's warrants, each exercisable at $0.20 per share for a period of 24 months from the date of issuance. d) During the six months ended June 30, 2026, 22,036,845 common shares at $0.12 per share and 22,036,845 warrants were issued in relation to the conversion of convertible debentures. Each warrant entitles the holder to acquire one additional common share at an exercise price of $0.12 per share for a period of two years from the date of issuance. e) During the six months ended June 30, 2026, the Company issued 271,150 common shares for gross proceeds of $32,538 pursuant to the exercise of warrants. f) During the six months ended June 30, 2026, the Company issued 2,276,739 common shares on the redemption of restricted stock units. g) During the six months ended June 30, 2026, 84,648 common shares were cancelled and returned to treasury and 84,648 share purchase warrants were also cancelled. Six Months Ended June 30, 2025 a) During the six months ended June 30, 2025, the Company issued 1,166,666 common shares on the redemption of restricted stock units. Share Purchase Warrants Six Months Ended June 30, 2026 a) On January 9, 2026, the Company issued 51,034,654 share purchase warrants in connection with a private placement and debt settlement transaction. Each warrant entitles the holder to acquire one common share at an exercise price of $0.12 per share for a period of two years from the date of issuance. b) On April 6, 2026, the Company issued 2,912,731 share purchase warrants in connection with the settlement of previously accrued debt. Each warrant entitles the holder to acquire one common share at an exercise price of $0.20 per share for a period of 12 months from the date of issuance. c) On June 16, 2026, the Company issued 7,968,319 share purchase warrants in connection with a private placement. Each warrant entitles the holder to acquire one common share at an exercise price of $0.20 per share for a period of 24 months from the date of issuance. The Company also issued 133,333 finder's warrants in connection with the private placement. Each finder's warrant entitles the holder to acquire one common share at an exercise price of $0.20 per share for a period of 24 months from the date of issuance. d) During the six months ended June 30, 2026, the Company issued 11,478,637 share purchase warrants in connection with the conversion of convertible debentures. Each warrant entitles the holder to acquire one common share at an exercise price of $0.12 per share for a period of two years from the date of issuance.
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 12 10. SHARE CAPITAL (continued) e) During the six months ended June 30, 2026, 271,150 share purchase warrants were exercised for gross proceeds of $32,538. f) During the six months ended June 30, 2026, 84,648 share purchase warrants were cancelled. Six Months Ended June 30, 2025 There was no share purchase warrant activity during the period. The continuity of the Company’s share purchase warrants is as follows: Number of Warrants Weighted Average Exercise Price ($) Balance, December 31, 2024 28,567,650 0.48 Issued 30,624,405 0.12 Exercised (6,284,750) 0.90 Balance, December 31, 2025 52,907,305 0.22 Issued 73,636,344 0.13 Exercised (271,150) 0.12 Expired (441,963) 0.12 Balance, June 30, 2026 125,830,536 0.16 The following table summarizes the share purchase warrants outstanding as at June 30, 2026: Number of Warrants Weighted Average Exercise Price Expiry Date Weighted Average Remaining Contractual Life ($) (yrs) 1,290,000 0.30 February 8, 2027 0.61 2,912,771 0.18 April 2, 2027 0.76 536,171 0.25 April 12, 2027 0.78 3,982,000 0.30 April 16, 2027 0.79 6,362,000 0.30 April 30, 2027 0.83 2,520 0.25 April 30, 2027 0.83 459,540 0.30 May 7, 2027 0.85 362,875 0.28 May 10, 2027 0.86 3,566,000 0.30 June 3, 2027 0.93 1,038,461 0.33 August 26, 2027 1.16 4,350,000 0.50 October 4, 2027* 1.26 29,519,536 0.12 October 28, 2027 1.33 409,388 0.12 December 31, 2028 2.51 51,034,654 0.12 January 9, 2028 1.53 4,000,093 0.12 January 20, 2028 1.56 7,207,394 0.12 January 23, 2028 1.57 8,101,652 0.20 June 16, 2028 1.96 695,481 0.12 October 20, 2028 2.31 125,830,536 0.16 1.40 * On September 26, 2025, the expiry date of 4,350,000 warrants originally due to expire October 4, 2025 was extended to October 4, 2027.
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 13 10. SHARE CAPITAL (continued) Stock Options The Company has in place a 10% “rolling” stock option plan dated for reference July 28, 2021, as amended on April 25, 2024, to grant stock options to its directors, officers, employees and consultants. In accordance with the plan, the aggregate number of securities reserved for issuance under the plan, at any point in time, will not exceed 10% of the number of common shares of the Company issued and outstanding at the time the option is granted, less any common shares reserved for issuance under share options granted under share compensation arrangements other than the plan. The exercise price of option grants will be determined by the Board of Directors but will not be less than the closing market price of the common shares on the CSE at the time of grant. All unexercised options granted under the plan will expire by the date fixed by the Board of Directors at the time the option is granted. During the period ended June 30, 2026, the Company granted an aggregate of 6,524,175 (June 30, 2025 – 310,000) stock options subject to vesting criteria and expensed $126,733 (June 30, 2025 - $112,617) as share-based compensation. The continuity of the Company’s stock options is as follows: Number of Options Weighted Average Exercise Price ($) Balance, December 31, 2024 8,108,312 0.60 Issued 310,000 0.12 Exercised (200,000) 1.44 Expired (566,667) 0.34 Balance, December 31, 2025 7,651,645 0.58 Issued 6,524,175 0.17 Expired (1,466,666) 1.44 Balance, June 30, 2026 12,709,154 0.27 The following table summarizes the stock options outstanding and exercisable as at June 30, 2026: Number of Options Outstanding Number of Options Exercisable Weighted Average Exercise Price Expiry Date Weighted Average Remaining Contractual Life ($) (yrs) 200,000 200,000 1.20 August 30, 2026 0.17 83,333 83,333 1.20 September 16, 2026 0.21 250,000 250,000 0.90 July 18, 2027 1.05 216,666 216,666 0.90 October 27, 2027 1.33 253,154 253,154 0.90 November 4, 2027 1.35 193,158 193,158 0.57 June 14, 2028 1.96 102,000 102,000 0.35 December 4, 2028 2.43 100,000 100,000 0.25 May 9, 2029 0.86 4,476,667 2,353,335 0.25 May 23, 2029 2.90 100,000 100,000 0.12 January 29, 2030 3.59 210,000 210,000 0.12 March 4, 2030 3.68 6,524,175 353,303 0.17 June 30, 2031 5.00 12,709,154 4,414,949 0.27 3.81
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 14 10. SHARE CAPITAL (continued) Restricted Share Units (“RSUs”) The Company has in place a 10% “rolling” Restricted Share Unit Plan dated effective as of July 28, 2011, which was ratified and approved by the Shareholders of the Company at the Company’s June 5, 2024 annual general meeting, which provides for the issuance of RSUs in such amounts as approved by the Company’s Board of Directors. The purpose of this Plan is to allow for certain discretionary bonuses and similar awards as an incentive and reward for selected Eligible Persons related to the achievement of long-term financial and strategic objectives of the Company and the resulting increases in shareholder value. The aggregate maximum number of common shares made available for issuance under the plan shall not exceed 10% of the number of outstanding common shares. The plan is a “rolling plan” and therefore, when RSUs are cancelled, terminated, or redeemed, common shares will be available for issuance pursuant to RSUs granted under the plan. The grant of an RSU award shall entitle the participant to the right to receive at the election of the Company, either one common share or an amount in cash equal to the market price of one common share on the settlement date. RSUs settled in common shares are equity-settled and the related share-based compensation expense is measured at fair value based on the Company’s share price on the date of grant subject to vesting criteria. The share-based compensation expense related to RSUs settled in cash are accrued over the vesting period of the units based on the Company’s share price on the date of grant. During the six months ended June 30, 2026, the Company granted 13,651,934 RSUs (June 30, 2025 – 2,229,076), of which 100,000 were exercised and settled for common stock (June 30, 2025 – 700,000). The Company recorded $2,547,180 in share-based compensation expense (June 30, 2025 – $353,621) relating to the vesting and redemption of RSUs during the first six months. In addition, 90,000 were cancelled during the period (June 30, 2025 – nil). As at June 30, 2026, restricted share units were outstanding as follows: Number of Units Weighted Average Fair Value ($) Balance, December 31, 2024 7,277,214 0.42 Granted 2,229,076 0.11 Expired (463,890) 0.43 Redeemed (3,481,850) 0.41 Balance, December 31, 2025 5,560,550 0.30 Granted 13,651,934 0.19 Redeemed (2,276,739) . 0.22 Cancelled (90,000) . 0.30 Balance, June 30, 2026 16,845,745 0.22 11. COMMITMENTS The Company had the following commitments as at June 30, 2026: a) In July 2023, the Company entered into an office rental agreement in Vancouver, British Columbia. The agreement has a term of 36 months, commencing November 1, 2024, and terminating on October 31, 2027, to accommodate the Company’s corporate operations. Pursuant to this agreement, the Company has a commitment to lease office space at a base rent rate of $89,532, $92,019, and $94,506 per annum respectively, plus common costs and taxes. This rental agreement is being accounted for under IFRS 16 – Right-of-use asset and corresponding lease liability on the Statement of Financial Position.
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 15 11. COMMITMENTS (continued) b) On July 16, 2024, the Company entered into an office and warehouse rental extension agreement in Vancouver, British Columbia, to accommodate the development of the Company’s clean energy technology and IP has a term of 36 months, commencing September 1, 2024 and terminating on August 31, 2027, to develop its clean energy technology and IP. Pursuant to this agreement, the Company has a commitment to lease the technology research and development space at a base rent rate of $58,317 per annum in year one, $61,094 per annum in year two, and $63,871 per annum in year three, plus common costs and taxes. This rental agreement is being accounted for under IFRS 16 – Right-of-use asset and corresponding lease liability on the balance sheet. 12. OFFICE AND GENERAL The following is a breakdown of the office and general expenses for the six months ended June 30, 2026 and 2025. Six Months Ended June 30, 2026 2025 Business development $ 463,312 $ 347,103 Depreciation and amortization 82,020 139,746 Investor relations 52,995 690,123 Office 160,258 91,189 Professional fees 187,691 155,196 Salaries and wages 364,683 419,360 Transfer agent and filing 30,430 28,682 Travel 43,378 23,264 Total office and general $ 1,384,767 $ 1,894,663 13. SEGMENTED INFORMATION Management determined that the Company has two reportable operating segments, being the development and commercialization of its clean energy technology in Canada and Europe and its oil and gas operations in Canada and the United States. Corporate includes the Company’s head office, general corporate administration and activity and intercompany eliminations. Determination of the operating segment was based on the level of financial reporting to the Company’s chief decision makers. For the six month period ended June 30, 2026 all revenues were derived from operations in Canada (June 30, 2025 - all revenues were derived from operations in Canada). At June 30, 2026, $2,151,489 (June 30, 2025 - $2,055,449) of non-current assets were located in Canada and nil (June 30, 2025 - $24,699) of non-current assets were in Europe. Six Months Ended June 30, 2026 Clean Energy Corporate Oil and Gas (Discontinued) Total $ $ $ $ General and administration 1,728,148 4,090,466 - 5,818,614 Loss from operations (1,728,148) (4,090,466) - (5,818,614) Net finance expenses (7,892) (11,360) - (19,252) Non-operating expenses - (45,850) - (45,850) Other income 328 - - 328 Net loss from continuing operations (1,735,712) (4,147,676) - (5,883,388) Net loss from discontinued operations - - (4,951). (4,951). Capital expenditures - - - - Total assets 1,976,741 174,306 442 2,151,489
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 16 13. SEGMENTED INFORMATION (continued) Six Months Ended June 30, 2025 Clean Energy Corporate Oil and Gas (Discontinued) Total $ $ $ $ General and administration 1,525,507 2,214,346 - 3,739,853 Loss from operations (1,525,507) (2,214,346) - (3,739,853) Net finance expenses (11,848) (143,810) - (155,658) Non-operating expenses - (4,482) - (4,482) Other income 4,867 - - 4,867 Net loss from continuing operations (1,532,488) (2,362,638) - (3,895,126) Net loss from discontinued operations - - (2,746) (2,746) Capital expenditures - - - - Total assets 1,813,750 242,262 826 2,056,839 14. CAPITAL MANAGEMENT The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the development of its clean energy technology and current oil operations. The Board of Directors does not establish quantitative return on capital criteria for management but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company is primarily dependent on external financing to fund its activities. In order to carry out the planned clean technology, research and development activities and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed using best efforts. The Company will continue to assess new clean technology opportunities and seek to acquire an interest in additional technologies if it feels there is sufficient economic potential and if it has adequate available or committed financial resources to complete such acquisitions. The Company is primarily dependent on external financing to fund its activities. In order to carry out the planned clean technology, research and development activities and pay for administrative costs, the Company will spend its existing working capital and raise additional funds as needed using best efforts. The Company will continue to assess new clean technology opportunities and seek to acquire an interest in additional technologies if it feels there is sufficient economic potential and if it has adequate available or committed financial resources to complete such acquisitions. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the size of the Company, is reasonable. There were no changes in the Company’s approach to capital management during the period ended June 30, 2026. The Company is not subject to externally imposed capital requirements. 15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Fair values The Company’s financial instruments include cash, receivables, accounts payable and accrued liabilities, and lease obligations. The carrying amounts of these financial instruments are a reasonable estimate of their fair values based on their current nature and current market rates for similar financial instruments. Derivative financial instruments are the only instruments measured at fair value through profit and loss in accordance with IFRS 9 – Financial Instruments, which requires the classification of financial instruments within a hierarchy that prioritizes the inputs to fair value measurement. 16. DISCONTINUED OPERATIONS In November 2021, the Company’s oil and gas property at West Hazel, Saskatchewan ceased production and oil wells were shut down due to the lack of production and extended production interruptions causing oil wells to be uneconomical to produce. On June 29, 2022, the Company formally ceased oil and gas operations.
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 17 16. DISCONTINUED OPERATIONS (continued) The Company commenced abandonment and reclamation activities at West Hazel in 2021, with the abandonment of seven wellbores. All wellbores have now been abandoned, surface equipment removed, with only surface reclamation remaining. The Company also developed a final reclamation plan for the entire property with the intent to complete the work in 2026 or 2027. The Company’s ceasing of oil and gas operations at its West Hazel field has completed the Company’s exit from the fossil fuel business. As at June 30, 2026, the assets and liabilities related to the oil and gas properties have been reclassified as assets and liabilities of discontinued operations in the consolidated financial statements. Operating results and cash flows related to these assets and liabilities have been included as net income or loss from discontinued operations in the consolidated statements of loss and comprehensive loss, and as cash flows from discontinued operations in the consolidated statements of cash flows, respectively. Net assets and net liabilities of discontinued operations: June 30, 2026 December 31, 2025 ($) ($) Assets Cash and cash equivalents 372 633 Receivables 70 147 Total Assets 442 780 Liabilities Accounts payable and accrued liabilities 29,496 45,683 Decommissioning Liability 417,134 417,134 Total Liabilities 446,630 462,817 Net gain (loss) and comprehensive gain (loss) from discontinued operations: Six Months Ended June 30, 2026 June 30, 2025 ($) ($) Revenue and costs Oil sales - - Royalties - - Operating costs - (1,830) - (1,830) General and Administrative Management and consulting - - Office and general (4,951) (916) Change in decommissioning estimate - - (4,951) (916) Gain (Loss) from discontinued operations (4,951) (2,746) Financing expenses - - Other income - - Net gain (loss) from discontinued operations (4,951) (2,746)
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HILLCREST ENERGY TECHNOLOGIES LTD. Notes to the Condensed Interim Consolidated Financial Statements For the Six Months Ended June 30, 2026 and 2025 (Expressed in Canadian dollars) (Unaudited) 18 16. DISCONTINUED OPERATIONS (continued) Oil And Gas Interests Net assets of discontinued operations include the Company’s oil and gas properties, which are summarized below: Cost At December 31, 2025 $ 4,533,916 At June 30, 2026 $ 4,533,916 Accumulated depletion At December 31, 2025 $ 1,659,793 At June 30, 2026 $ 1,659,793 Impairment At December 31, 2025 $ 2,874,123 At June 30, 2026 $ 2,874,123 Carrying amounts At December 31, 2025 $ - At June 30, 2026 $ - The Company’s oil and gas assets were fully impaired during the year ended December 31, 2021. Decommissioning Liability Net liabilities of discontinued operations include the decommissioning liabilities associated with the Company’s oil and gas properties, which are summarized below: West Hazel, Saskatchewan Balance, December 31, 2025 and June 30, 2026 $ 417,134 During the year ended December 31, 2025, the provision for the decommissioning liability for the Hartburg Project was re-estimated and it was determined that there were no amounts owing and the total undiscounted remaining amount of estimated cash flows required to settle the provision was Nil. The provision had been estimated using a risk-free discount rate of 1.18% and an inflation rate of 2.00%. At June 30, 2026, the total undiscounted amount of estimated cash flows required to settle the provision for decommissioning liability for the West Hazel assets was $417,134 (December 31, 2025 - $417,134), $259,666 of which represents the Company’s 62.25% share of the decommissioning liability. During the year ended December 31, 2024, it was determined it is unlikely the partners bearing the other 37.75% of the decommissioning liability will be able to pay their portion of the decommissioning liability. As a result, a change in the decommissioning estimate was made to record the full gross value of the estimated decommissioning liability as attributable to the Company. The provision is presented on an undiscounted basis as at June 30, 2026 and December 31, 2025, as it has been estimated by management that the Company will incur remaining decommissioning liability costs during 2026 or 2027. Based on this estimate, the Company’s assets and liabilities of discontinued operations have been presented as current assets and liabilities as at June 30, 2026. 17. SUBSEQUENT EVENTS Subsequent to June 30, 2026, the Company granted 1,700,978 RSUs and 1,000,000 stock options. In addition, 215,526 RSUs and 416,667 warrants were exercised.