Magnetic North Acquisition : Q3 - September 30, 2023

MAGNETIC NORTH ACQUISITION CORP.

CONDENSED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2023 AND 2022

(EXPRESSED IN CANADIAN DOLLARS)

Notice to Reader

The accompanying unaudited condensed interim financial statements of Magnetic North Acquisition Corp. (the "Company") have been prepared by and are the responsibility of management. The unaudited condensed interim financial statements have not been reviewed by the Company's auditors.

Magnetic North Acquisition Corp.

Statements of Financial Position (Expressed in Canadian Dollars) (Unaudited)

			As at		As at
			September 30,	December 31,
			2023		2022
	ASSETS
	Current assets
	Cash and cash equivalents	$	8,569	$	13,571
	Short-term investments (note 3)		27,400		27,400
	Trade and other receivables		-		29,891
	Advances to investees (note 4)		-		167,437
	Prepaids and other current assets		-		1,399
	Total current assets		35,969		239,698
	Non-current assets
	Investments - fair value through profit or loss (note 6)		-		-
	Property, plant and equipment (note 7)		3		3
	Mineral claims (note 8)		1		1
	Exploration and evaluation assets (note 9)		1		1
	Other assets (note 10)		314,413		314,413
	Total assets	$	350,387	$	554,116
	LIABILITIES AND SHAREHOLDERS' DEFICIENCY
	Current liabilities
	Accounts payable and accrued liabilities (note 11)	$	765,404	$	1,247,892
	Promissory note payable		176,984		176,984
	Deferred revenue		139,000		-
	Advances from investees (note 4)		175,481		-
	Total current liabilities		1,256,869		1,424,876
	Non-current liabilities
	Asset retirement obligation (note 12)		195,476		194,936
	Financial liability - Series A preferred shares (note 13)		17,404,749		17,404,749
	Total liabilities		18,857,094		19,024,561
	Shareholders' deficiency
	Common shares (note 14)		29,083,903		29,083,903
	Warrants (note 15)		1,088,072		1,088,072
	Contributed surplus		3,625,840		3,557,451
	Accumulated deficit		(52,304,522)		(52,199,871)
	Total shareholders' deficiency		(18,506,707)		(18,470,445)
	Total liabilities and shareholders' deficiency	$	350,387	$	554,116
	Nature of operations and going concern (note 1)
	Commitments (note 21)
	Subsequent events (note 23)

The accompanying notes to the financial statements are an integral part of these statements.

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Magnetic North Acquisition Corp.

Statements of Loss and Comprehensive Loss (Expressed in Canadian dollars)

(Unaudited)

		Three Months Ended		Nine Months Ended
		September 30,		September 30,
		2023		2022		2023		2022
Revenues
Advisory fees	$	60,000	$	-	$	820,000	$	-
Expenses
Exploration and evaluation expenses		3,930		1,050		13,255		9,292
General and administrative (note 17)		335,090		150,824		842,517		616,327
Share-based compensation (note 16)		14,798		52,210		68,389		216,722
Depreciation		-		724		-		2,172
Total expenses		353,818		204,808		924,161		844,513
Loss before other items		(293,818)		(204,808)		(104,161)		(844,513)
Other items
Accretion		(180)		(190)		(540)		(570)
Finance income, net		-		-		50		10
Preferred share-based transaction costs		-		-		-		(207,810)
Fair value adjustment of investments (note 6)		-		5,000,000		-		5,000,000
Net and comprehensive income (loss) for the period $	(293,998)	$	4,795,002	$	(104,651)	$	3,947,117
Net and comprehensive income (loss) per share
- Basic and Diluted (note 18)	$	(0.00)	$	0.08	$	(0.00)	$	0.07
Weighted average number of common shares
- Basic and Diluted (note 18)		59,097,178		59,097,178		59,097,178		59,097,178

The accompanying notes to the financial statements are an integral part of these statements.

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Magnetic North Acquisition Corp.

Statements of Cash Flows (Expressed in Canadian Dollars) (Unaudited)

		Nine Months Ended
		September 30,
		2023		2022
Operating activities
Net income (loss) for the period	$	(104,651)	$	3,947,117
Adjustments for:
Depreciation		-		2,172
Accretion		540		570
Share-based compensation		68,389		216,722
Fair value adjustment of investments		-		(5,000,000)
Share-based transaction costs		-		193,806
Changes in non-cash working capital items:
Trade and other receivables		29,891		(11,097)
Prepaid expenses and other current assets		1,399		22,147
Deferred revenue		139,000		-
Accounts payable and accrued liabilities		(482,488)		211,399
Net cash used in operating activities		(347,920)		(417,164)
Investing activities
Advances from (to) investees		342,918		(17,740)
Net cash provided by (used in) investing activities		342,918		(17,740)
Financing activities
Financing activities
Proceeds from private placement		-		360,031
Proceeds from subscription receipts		-		75,000
Net cash provided by financing activities		-		435,031
Net change in cash and cash equivalents		(5,002)		127
Cash and cash equivalents, beginning of period		13,571		38
Cash and cash equivalents, end of period	$	8,569	$	165

The accompanying notes to the financial statements are an integral part of these statements.

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Magnetic North Acquisition Corp.

Statements of Changes in Shareholders' Deficiency (Expressed in Canadian Dollars)

(Unaudited)

	Common Shares					Contributed	Accumulated	Shareholders'
	Number (#)	Amount ($)		Warrants		Surplus	Deficit		Deficiency
Balance, December 31, 2021	59,097,178	$ 29,083,903		$	894,266	$	3,284,907	$ (46,349,086)	$	(13,086,010)
Share-based compensation	-	-			-		216,722	-		216,722
Preferred share issue costs - warrants	-	-			193,806		-	-		193,806
Net and comprehensive income for the period	-	-			-		-	3,947,117		3,947,117
Balance, September 30, 2022	59,097,178	$ 29,083,903		$	1,088,072	$	3,501,629	$ (42,401,969)	$	(8,728,365)
Balance, December 31, 2022	59,097,178	$ 29,083,903		$	1,088,072	$	3,557,451	$ (52,199,871)	$	(18,470,445)
Share-based compensation	-	-			-		68,389	-		68,389
Net and comprehensive loss for the period	-	-			-		-	(104,651)		(104,651)
Balance, September 30, 2023	59,097,178	$ 29,083,903		$	1,088,072	$	3,625,840	$ (52,304,522)	$	(18,506,707)

The accompanying notes to the financial statements are an integral part of these statements.

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Magnetic North Acquisition Corp.

Notes to the Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022 (Expressed in Canadian Dollars)

(Unaudited)

1. Nature of operations and going concern

Prior to October 22, 2019, Magnetic North Acquisition Corp. (the "Company" or "Magnetic North") (formerly Black Bull Resources Inc.) was in the business of mining, processing and marketing quartz from its White Rock claim in Nova Scotia, Canada. The Company also investigated the commercialization of its kaolin resource.

On October 22, 2019, the Company completed an asset purchase transaction with a group of investment and business professionals to effect an arm's length "Change of Business" (as defined in Policy 5.2 of the TSX Venture Exchange ("TSXV")) transaction (the "Transaction") within the meaning of such terms in the policies of the TSXV. With the completion of the Transaction, the Company changed its primary business to merchant banking and changed its name to Magnetic North Acquisition Corp. Magnetic North is an investment and merchant banking company focused on creating shareholder value by providing strategic and financial advice and services to companies in the clean power technology, consumer products, manufacturing and information technology sectors.

The Company's common shares and Series A preferred shares trade on the TSXV under the symbol "MNC" and "MNC.PR.A", respectively. The Company was incorporated under the Business Corporations Act (Alberta) on July 18, 1997. On June 12, 2008, the Company continued under the Canada Business Corporations Act. The Company's registered and head office is at 1000, 250 2nd Street SW, Calgary, Alberta.

These financial statements of the Company were reviewed, approved and authorized for issue by the Board of Directors on November 28, 2023.

These unaudited condensed interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. Accordingly, these unaudited condensed interim financial statements do not give effect to the adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and meet its liabilities and commitments in other than the normal course of business and at amounts different from those in these unaudited condensed interim financial statements.

The Company continues to incur operating losses. The Company has minimal revenue-generating operating activities and has a significant accumulated deficit. The Company has incurred losses in prior periods, with a current net and comprehensive loss of $104,651 during the nine months ended September 30, 2023 (nine months ended September 30, 2022 - income of $3,947,117) and has an accumulated deficit of $52,304,522 as at September 30, 2023 (December 31, 2022 - $52,199,871). In addition, the Company had a working capital deficiency of $1,220,900 as at September 30, 2023 (December 31, 2022 - working capital deficiency of $1,185,178). Such material uncertainties cast significant doubt as to the ability of the Company to satisfy its obligations as they come due and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern.

The Company's continued existence is dependent upon the success of its new business focus as an investment company. However, there can be no assurances that the steps management have taken will be successful. Management's opinion is that the Company will balance its current cash resources against new opportunities and additional financings. Management is actively working on obtaining additional funds from investors, and from monetizing its current investments.

If the going concern assumption were not appropriate for these unaudited condensed interim financial statements, adjustments might be necessary to the carrying value of assets and liabilities, reported revenues and expenses and the statement of financial position classifications used.

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Magnetic North Acquisition Corp.

Notes to the Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022 (Expressed in Canadian Dollars)

(Unaudited)

2. Basis of presentation Statement of compliance

The Company applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the IFRS Interpretations Committee ("IFRIC"). These unaudited condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by IFRS as issued by the IASB.

The policies applied in these unaudited condensed interim financial statements are based on IFRS issued and outstanding as of November XX, 2023, the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these unaudited condensed interim financial statements as compared with the most recent audited financial statements as at and for the twelve months ended December 31, 2022, except as noted below. Any subsequent changes to IFRS that are given effect in the Company's annual financial statements for the year ending December 31, 2023 could result in restatement of these unaudited condensed interim financial statements.

Basis of measurement and presentation

These unaudited condensed interim financial statements have been prepared on a historical cost basis, with the exception of financial instruments classified as fair value through profit or loss. In addition, these unaudited condensed interim financial statements have been prepared using the accrual basis of accounting except for cash flow information. These unaudited condensed interim financial statements are presented in Canadian dollars, which is also the Company's functional currency.

Basis of consolidation

A subsidiary is an entity over which the Company has control. The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial results of subsidiaries are included in the unaudited condensed interim financial statements from the date that control commences until the date that control ceases.

Significant accounting judgments, estimates and new accounting policies

The preparation of these unaudited condensed interim financial statements in accordance with IFRS requires management to make judgments and estimates that could materially affect the amounts recognized in the unaudited condensed interim financial statements. By their nature, judgments and estimates may change in light of new facts and circumstances in the internal and external environment. The following judgments and estimates are those deemed by management to be material to the Company's unaudited condensed interim financial statements.

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Magnetic North Acquisition Corp.

Notes to the Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022 (Expressed in Canadian Dollars)

(Unaudited)

2. Basis of presentation (continued) Judgments

Going Concern

At each reporting period, management exercises judgment in assessing the Company's ability to continue as a going concern by reviewing the Company's performance, resources and future obligations.

Fair value of financial instruments

For Level 3 investments where quoted prices are not readily available, the Company values its investments using recognized valuation models. Some or all of the significant inputs into these models may not be observable in the market and are derived from market prices or rates or are estimated based on assumptions. Valuation models that employ significant unobservable inputs requires a higher degree of management judgment and estimation in the determination of fair value.

Impairment

Significant judgment is required to assess when impairment indicators exist, and impairment testing is required. The assessment of impairment indicators is based on management's judgment of whether there are internal and external factors that would indicate that a cash generating unit ("CGU") and specifically the non-financial assets within the CGU, are impaired. The determination of a CGU is also based on management's judgment and is an assessment of the smallest group of assets that generate cash inflows independently of other assets.

Investment Entity Status

The following are the criteria within IFRS 10 Consolidated Financial Statements, which the Company used to evaluate and determine that it meets the definition of an Investment Entity:

• Obtain funds from one or more investors for the purpose of providing those investor(s) with investment management services;
• Commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and
• Measures and evaluates the performance of substantially all its investments on a fair value basis.

The Company has evaluated the above criteria and determined that it meets the definition of an Investment Entity. As a result of meeting the definition of an Investment Entity, subsidiaries which otherwise would have been consolidated are carried at fair value through profit or loss ("FVTPL").

Management exercises judgment in applying criteria in IFRS 10 Consolidated Financial Statements, which determines the Company's status as an investment entity.

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Magnetic North Acquisition Corp.

Notes to the Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022 (Expressed in Canadian Dollars)

(Unaudited)

2. Basis of presentation (continued)

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities arise from temporary differences between the tax bases of assets and liabilities and their carrying amounts reported in the financial statements. Deferred income tax assets also reflect the benefit of unutilized tax losses that can be carried forward to reduce income taxes in future years. Such method requires the exercise of significant judgment in determining whether or not the Company's deferred tax assets are probable of recovery from taxable income of future years and therefore can be recognized in the financial statements. Also, estimates are required to determine the expected timing upon which tax assets will be realized and upon which tax liabilities will be settled.

Critical Accounting Estimates

Asset Retirement Obligation

The Company's estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of future expenditures. These costs are estimated based on the Company's interpretation of current regulatory requirements and constructive obligations and are measured at fair value. Fair value is determined based on the net present value of estimated future cash expenditures for the settlement of restoration liabilities that may occur upon decommissioning of the property.

Impairment of Non-Financial Assets

In determining the estimated recoverable amount of a CGU subject to impairment testing, the Company measures the estimated recoverable amount of a CGU as the higher of fair value less costs of disposal and its value in use. Estimated recoverable amounts of a CGU are evaluated and calculated using various data and assumptions. The data and assumptions used in the estimates of recoverable amount are assessed for reasonableness based on the information available at the time the estimate of recoverable amount is prepared. The estimate of recoverable amount for a CGU involves certain significant assumptions including the forecasted revenue growth rates, forecasted earnings before finance costs, taxes, depreciation and amortization and the discount rate.

Fair value of financial instruments

The Company measures its financial instruments at fair value or amortized cost. Fair value is determined on the basis of market prices from independent sources, if available. If there is no available market price, then fair value is determined by using valuation models. The inputs to these models, such as expected volatility and liquidity discounts, are derived from observable market data where possible, but where observable date is not available, judgment is required to establish fair values. There is inherent uncertainty and imprecision in estimating the factors that can affect fair value, and in estimating fair values generally, when observable data is not available. Changes in assumptions and inputs used in valuing financial instruments could affect the reported fair values.

Share-Based Compensation

The Company uses an option pricing model to determine the fair value of equity-settled share-based compensation including stock options and warrants. Inputs to the model are subject to various estimates relating to volatility, interest rates, dividend yields and expected life of the units issued. Fair value inputs are subject to market factors as well as internal estimates. The Company considers historic trends together with any new and comparative information to determine the best estimate of fair value at the date of grant.

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Magnetic North Acquisition Corp.

Notes to the Financial Statements

For the Three and Nine Months Ended September 30, 2023 and 2022 (Expressed in Canadian Dollars)

(Unaudited)

2. Basis of presentation (continued) Recent Accounting Pronouncements

The Company has reviewed new and amended accounting pronouncements that have been issued but are not yet effective:

IAS 1 - Presentation of Financial Statements ("IAS 1") was amended in January 2020 to provide a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or non-currentis based solely on a company's right to defer settlement at the reporting date. The right needs to be unconditional and must have substance. The amendments also clarify that the transfer of a company's own equity instruments is regarded as settlement of a liability, unless it results from the exercise of a conversion option meeting the definition of an equity instrument. The adoption of these amendments did not have any impact on the Company's financial statements.

Amendments to IAS 8 - accounting policies, changes in accounting estimates and errors

The amendments to IAS 8 are applied in selecting and applying accounting policies, accounting for changes in estimates and reflecting corrections of prior period errors. The standard requires compliance with any specific IFRS applying to a transaction, event or condition, and provides guidance on developing accounting policies for other items that result in relevant and reliable information. Changes in accounting policies and corrections of errors are generally retrospectively accounted for, whereas changes in accounting estimates are generally accounted for on a prospective basis. The adoption of these amendments did not have any impact on the Company's financial statements.

Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction The amendments to IAS 12 Income Taxes require companies to recognize deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. They will typically apply to transactions such as leases of lessees and decommissioning obligations and will require the recognition of additional deferred tax assets and liabilities. The amendment should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. No significant impact to the Company's financial statements is expected.

Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies - The IASB amended IAS 1 to require entities to disclose their material rather than their significant accounting policies. The amendments define what is 'material accounting policy information' and explain how to identify when accounting policy information is material. They further clarify that immaterial accounting policy information does not need to be disclosed. If it is disclosed, it should not obscure material accounting information. To support this amendment, the IASB also amended IFRS Practice Statement 2 Making Materiality Judgements to provide guidance on how to apply the concept of materiality to accounting policy disclosures.

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