Arras Minerals (ARRKF) 6-K Current report (foreign)

Exhibit 99.1

Condensed Interim Consolidated Financial Statements (Unaudited)

For the three and six months ended April 30, 2022

and the period from February 5, 2021 (inception) to April 30, 2021

(Expressed in United States dollars)

Index	Page
Condensed Interim Consolidated Statements of Financial Position	1
Condensed Interim Consolidated Statements of Comprehensive Loss	2
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity	3
Condensed Interim Consolidated Statements of Cash Flows	4
Notes to the Condensed Interim Consolidated Financial Statements	5 –20

ARRAS MINERALS CORP.

Condensed Interim Consolidated Statements of Financial Position

(Expressed in United States Dollars)

(Unaudited)

	Notes	April 30, 2022		October 31, 2021 (Audited)
		$		$
Assets
Current
Cash and cash equivalents	15	2,113,974		3,806,291
Other receivables		61,706		15,929
Prepaid expenses	7	108,218		32,030
Due from related party	13	7,547		2,808
Loans to Ekidos Minerals LLP	5,8	—		3,178,500
		2,291,445		7,035,558
Non-Current
Office and equipment	4,9	159,452		105,166
Mineral properties	4,5,6,10	5,035,259		651,603
Right-of Use Assets	11	306,208		—
Other non-current assets		33,482		—
Prepaid expenses	7	550,000		—
Total Assets		8,375,846		7,792,327
Liabilities
Current
Accounts payable and accrued liabilities	13	511,150		541,624
Lease liability	11	67,216		—
		578,366		541,624
Non-Current
Lease Liability	11	239,095		—
Total Liabilities		817,461		541,624
Shareholders’ Equity
Share capital	12	11,246,808		8,439,234
Reserves	12	1,231,609		923,051
Deficit		(4,920,032	)	(2,111,582	)
Total Shareholders’ Equity		7,558,385		7,250,703
Total Liabilities and Shareholders’ Equity		8,375,846		7,792,327

Nature of operations and going concern (Note 1)

Subsequent events (Note 18)

On behalf of the Board:

/s/ Brian Edgar	/s/ Daniel Kunz
Director	Director

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

1 

ARRAS MINERALS CORP.

Condensed Interim Consolidated Statements of Comprehensive Loss

(Expressed in United States Dollars)

(Unaudited)

	Notes		For the three months ended April 30, 2022			For the six months ended April 30, 2022			For the period from February 5, 2021 to April 30, 2021
Expenses				$			$			$
Exploration		13		1,448,568			1,693,883			81,804
Personnel		13		248,408			524,478			201,576
Professional services				95,300			192,681			156,098
Directors’ fees		13		80,077			166,793			140,553
Office and administrative				36,401			73,235			12,281
Marketing and shareholders’ communication				48,603			58,760			—
Depreciation		9		13,718			13,718			4,827
Loss from operations				(1,971,075	)		(2,723,548	)		(597,139	)
Foreign exchange income (loss)				3,414			(92,847	)		34,078
Other income				7,913			7,913			—
Interest income				18			32			—
Other income (loss)				11,345			(84,902	)		34,078
Net and Comprehensive loss for the period				(1,959,730	)		(2,808,450	)		(563,061	)
Basic and Diluted Loss per common share				(0.04	)		(0.06	)		(0.03	)
Weighted average number of common shares outstanding				51,475,150			50,754,643			19,738,275

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

2 

ARRAS MINERALS CORP.

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

(Expressed in United States Dollars)

(Unaudited)

			Share Capital
	Notes		Common Shares		Amount		Equity Reserves		Deficit			Shareholders’ Equity
					$		$		$			$
Balance, October 31, 2021				47,803,100		8,439,234		923,051		(2,111,582	)		7,250,703
Private placements, net of share issue costs		12		3,672,050		2,807,574		—		—			2,807,574
Share-based payment		12		—		—		308,558		—			308,558
Net loss for the period				—		—		—		(2,808,450	)		(2,808,450	)
Balance, April 30, 2022				51,475,150		11,246,808	$	1,231,609		(4,920,032	)		7,558,385

			Share Capital
	Notes		Common Shares	Amount	Equity Reserves	Deficit		Shareholders’ Equity
				$	$	$		$
Shares issued upon inception (February 5, 2021)		1,12	100	1	—	—		1
Shares issued pursuant to asset purchase agreement		5	36,000,000	1,367,668	—	—		1,367,668
Private placement, net of share issue costs		12	5,035,000	1,982,706	—	—		1,982,706
Net loss for the period			—	—	—	(563,061	)	(563,061	)
Share-based payment		12	—	—	305,876	—		305,876
Balance, April 30, 2021			41,035,100	3,350,375	305,876	(563,061	)	3,093,190

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

3 

ARRAS MINERALS CORP.

Condensed Interim Consolidated Statement of Cash Flows

(Expressed in United States Dollars)

(Unaudited)

	Notes		Six months ended April 30, 2022			Period from inception to April 30, 2021
Operating Activities				$			$
Net loss for the period				(2,808,450	)		(563,061	)
Items not affecting cash
Depreciation		9		28,474			4,827
Unrealized foreign exchange loss				132,392			(32,013	)
Share-based payment				308,558			305,876
				(2,339,026	)		(284,371	)
Changes in non-cash working capital, net of acquisition
Other receivables				110,063			—
Prepaid expenses				(62,275	)		—
Other non-current assets				(33,482	)		—
Due from related party				(4,739	)		118,668
Accounts payable and accrued liabilities				70,460			145,015
				80,027			263,683
Cash Used in Operating Activities				(2,258,999	)		(20,688	)
Financing Activities
Issuance of common shares, net of share issue costs				2,807,574			2,001,245
Repayment of lease liability		11		(13,211	)		—
Cash Provided by Financing Activities				2,794,363			2,001,245
Investing Activities
Purchase of Ekidos Minerals LLP common shares		4		(1,000	)		—
Cash received on acquisition of Ekidos Minerals LLP		4		34,050			—
Purchase of equipment		9		(24,887	)		—
Loans to Ekidos Minerals LLP		8		(2,136,500	)		(450,000	)
Cash Used in Investing Activities				(2,128,337	)		(450,000	)
Effect of Foreign Currency Translation on Cash and cash Equivalents				(99,344	)		32,013
Net Change in Cash and Cash Equivalents				(1,692,317	)		1,562,570
Cash and Cash Equivalents, Beginning of Period				3,806,291			—
Cash and Cash Equivalents, End of Period				2,113,973			1,562,570

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

4 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

1. NATURE OF OPERATIONS AND GOING CONCERN

Arras Minerals Corp. (the “Company”) was incorporated on February 5, 2021 under the Business Corporations Act (British Columbia) as part of an asset purchase agreement to reorganize Silver Bull Resources, Inc. (“Silver Bull”) as described in Note 5. The Company’s head office is located at 1605-777 Dunsmuir Street, Vancouver, British Columbia, Canada, V7Y 1K4.

The Company is engaged in the acquisition, exploration, and development of mineral property interests. On February 3, 2022, the Company purchased 100% of the issued and outstanding shares of Ekidos Minerals LLP (“Ekidos”) and Ekidos became a wholly-owned subsidiary of the Company. Total consideration was $1,000 as described in Note 4. Ekidos is in the business of the exploration and evaluation of mineral properties. See Notes 4 and 5 for further details.

The Company’s assets consist primarily of the option to acquire a 100% interest in the Beskauga property (“Beskauga”) in Kazakhstan, and conducts its operations through Ekidos, who holds exploration licenses for properties located in Kazakhstan.

The Company has not yet determined whether the properties contain mineral reserves where extraction is both technically feasible and commercially viable. The business of mining and the exploration for minerals involves a high degree of risk and there can be no assurance that such activities will result in profitable mining operations.

These unaudited condensed interim consolidated financial statements are prepared on a going concern basis, which contemplate that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. The Company has incurred operating losses to date and has no current sources of revenue or cash inflows from operations. The Company relies on share issuances in order to fund its exploration and other business objectives. During the six months ended April 30, 2022, the Company has raised Canadian dollar (“$CDN”) $3.6 million (United States dollars of $2.9 million) and received gross proceeds of $CDN 1.6 million ($1.3 million) in May 2022 through the issuance of common shares. As of April 30, 2022, the Company had cash and cash equivalents of $2.1 million, which based on current forecasts, is sufficient to fund the Company’s required expenditures under the commitments of the option agreement for Beskauga and general corporate activities.

The Company’s ability to continue as a going concern and fulfill its commitments under the Beskauga option agreement is dependent upon successful execution of its business plan, raising additional capital, or evaluating strategic alternatives. The Company expects to continue to raise the necessary funds primarily through the issuance of common shares. There can be no guarantees that future equity financing will be available in which case the Company may need to reduce its exploration activities. There can be no assurance that management’s plan will be successful. If the going concern assumption was not appropriate for these condensed interim consolidated financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported expenses and the balance sheet classifications used. Such adjustments could be material.

On March 11, 2020, the novel coronavirus outbreak (“COVID-19”) was declared a pandemic by the World Health Organization. Other than travel restrictions to the Company’s exploration projects, the Company has not been significantly impacted by COVID-19. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the Company’s business are not known at this time. These impacts could include an impact on the Company’s ability to obtain equity financing to fund additional exploration activities as well as the Company’s ability to explore and conduct business.

2. BASIS OF PRESENTATION

a) Statement of compliance

These condensed interim consolidated financial statements were prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting. These condensed interim consolidated financial statements do not include all disclosures required for annual audited financial statements. Accordingly, they should be read in conjunction with the notes to the Company’s audited financial statements for the period from February 5, 2021 (date of incorporation) to October 31, 2021 (the “annual financial statements”), which include the information necessary or useful to understanding the Company’s business and financial statement presentation. In particular, the Company’s use of judgements and estimates and significant accounting policies were presented in note 5 of those annual financial statements and have been consistently applied in the preparation of the condensed interim financial statements. The annual financial statements were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

5 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

These condensed interim consolidated financial statements are presented in United States dollars (“USD”), which is the Company’s functional currency.

The Company’s interim results are not necessarily indicative of its results for a full fiscal year.

b) Basis of presentation

These condensed interim consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value. In addition, these condensed interim consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

c) Approval of the condensed interim consolidated financial statements

These condensed interim consolidated financial statements were authorized for issue by the Board of Directors on June 28, 2022.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies followed in these condensed interim consolidated financial statements are consistent with those disclosed in Note 5 of the Company’s financial statements for the year ended October 31, 2021.

a) Foreign currency translation

Statement of consolidated financial position: monetary assets and liabilities are translated into USD using period end exchange rates. Non-monetary assets and liabilities are translated into USD using historical exchange rates.

Statement of consolidated comprehensive loss: income, expenses, and other comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions).

Statement of consolidated changes in shareholders’ equity: all resulting exchange differences are recognized as a separate component of equity and in other comprehensive loss.

b) Going concern

The assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but not limited to, 12 months from the end of the reporting period. The Company is aware that material uncertainties exist related to events or conditions that may cast substantial doubt upon the Company’s ability to continue as a going concern.

c) Mineral properties

Costs directly related to the acquisition of mineral properties are capitalized. Option payments are considered acquisition costs if the Company has the intention of exercising the underlying option.

Exploration, evaluation and property maintenance costs incurred on sites without an existing mine and on areas outside the boundary of a known mineral deposit which contains proven and probable reserves are expensed as incurred up to the date of establishing that property costs are economically recoverable and that the project is technically feasible.

6 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

Mineral properties are not subject to depletion or amortization, but rather are tested for impairment when circumstances indicate that the carrying value may not be recoverable.

Development expenditures are those incurred subsequent to the establishment of economic recoverability and after receipt of project development approval from the Board of Directors. The approval from the Board of Directors will be dependent upon the Company obtaining sufficient financial resources, permits, and licenses to develop the mineral property. Development costs are capitalized and included in the carrying amount of the related property.

Mineral property and mine development costs capitalized are amortized using the units-of-production method over the estimated life of the proven and probable reserves

d) Economic recoverability of future economic benefits of exploration and evaluation assets

Management has determined that exploration and evaluation of mineral properties and related costs incurred, which have been recognized on the condensed interim consolidated statements of financial position, are economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefit including geological data, scoping studies, accessible facilities, and existing and future permits.

e) Principle of consolidation

Subsidiaries are entities controlled by the Company and are included in the financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries are changed where necessary to align with the policies adopted by the Company. All intercompany balances are eliminated on consolidation.

The condensed interim consolidated financial statements include accounts of the Company and its wholly owned subsidiary, Ekidos, from the date of acquisition on February 3, 2022.

f) Leases

As per IFRS 16 Leases, at inception, the Company assesses whether a contract contains an embedded lease. A contract contains a lease when the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

The Company, as lessee, is required to recognize a right-of-use asset (“ROU asset”), representing its right to use the underlying asset, and a lease liability, representing its obligation to make lease payments.

The Company may elect to not apply IFRS 16 to leases with a term of less than 12 months or to low value assets, which is made on an asset by asset basis.

The Company recognizes a ROU asset and a lease liability at the commencement of the lease. The ROU asset is initially measured based on the present value of lease payments, plus initial direct cost, less any incentives received. It is subsequently measured at cost less accumulated amortization, impairment losses and adjusted for certain remeasurements of the lease liability. The ROU asset is amortized from the commencement date over the shorter of the lease term or the useful life of the underlying as set. The ROU asset is subject to testing for impairment if there is an indicator of impairment.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental borrowing rate. The incremental borrowing rate is the rate which the operation would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the ROU asset in a similar economic environment.

7 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

Lease payments included in the measurement of the lease liability are comprised of:

•fixed payments, including in-substance fixed payments;

•variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

•amounts expected to be payable under a residual value guarantee;

•the exercise price under a purchase option that the Company is reasonably certain to exercise;

•lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option; and

•penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or a rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

Variable lease payments that do not depend on an index or a rate not included in the initial measurement of the ROU asset and lease liability are recognized as an expense in profit or loss in the period in which they are incurred.

The ROU assets are presented within “Right-of-use assets” and the lease liabilities are presented in “Lease liability” on the condensed interim consolidated statement of financial position.

g) Critical accounting estimates, judgments and assumptions

The preparation of the Company’s condensed interim consolidated financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised

i) Asset acquisition versus business combination

Management had to apply judgment with respect to whether the acquisition through the asset purchase agreement (as discussed in Notes 4 and 5) was an asset acquisition or business combination. The assessment required management to assess the inputs, processes and outputs of the company acquired at the time of the acquisition. Pursuant to the assessment, the asset purchase agreement was considered to be an asset acquisition.

ii) Fair value of net assets acquired

The Company makes estimates in determining the fair value of the assets acquired as part of an acquisition. Management exercises judgment in estimating the probability and timing of when cash flows are expected to be achieved, which is used as the basis for estimating fair value. Future performance results that differ from management’s estimates could result in changes to liabilities recorded, which are recorded as they arise through profit or loss.

iii) Right-of-use assets and lease liabilities

The right of use assets and lease liabilities are measured by discounting the future lease payments at incremental borrowing rate. The incremental borrowing rate is an estimated rate the Company would have to obtain an asset of a similar value to the right-of-use assets in a similar economic environment.

8 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

4. ACQUISITION OF EKIDOS MINERALS LLP

On February 3, 2022, the Company purchased 100% of the issued and outstanding shares of Ekidos. Total consideration was $1,000 cash. Ekidos is in the business of the exploration and evaluation of mineral properties in Kazakhstan.

The acquisition has been accounted for by the Company as a purchase of assets and assumption of liabilities. The acquisition did not qualify as a business combination under IFRS 3 - Business Combinations, as the significant inputs, processes and outputs, that together constitute a business, did not exist in Ekidos at the time of acquisition.

The following table summarizes the preliminary purchase price allocation:

Purchase price:
Cash	$	1,000
Total consideration		1,000
Net assets acquired:
Cash		34,050
Other receivables		371,294
Prepaid expenses		577,551
Inventory		309
Office and equipment		44,938
Mineral properties		4,383,656
Accounts payable and accrued liabilities		(95,798	)
Loans payable to Arras		(5,315,000	)
Total net assets acquired	$	1,000

5. ASSET PURCHASE AND SEPARATION AND DISTRIBUTION AGREEMENTS

On March 19, 2021, pursuant to an asset purchase agreement with Silver Bull, a majority shareholder (88% interest) and related party, Silver Bull transferred all of its rights, title and interest in and to the Beskauga Option Agreement, as described in Note 6, to the Company. The consideration payable by the Company to Silver Bull was $1,367,668, paid through the issuance of 36,000,000 common shares of the Company.

The fair value of the assets at the date of transfer was as follows:

Mineral properties	$	327,690
Mining equipment		45,647
Computer equipment and software		9,331
Loans to Ekidos (the “Silver Bull Loans”)		985,000
Net assets acquired	$	1,367,668

On September 24, 2021, pursuant to a Separation and Distribution Agreement, Silver Bull distributed to its shareholders one common share of the Company for each Silver Bull common share held by such shareholders, or 34,547,838 common shares of the Company in total (the “Distribution”). Upon completion of the Distribution, Silver Bull retained 1,452,162 common shares of the Company, representing a 4% interest in the Company on the Distribution date. As of April 30, 2022, Silver Bull owns 845,262 common shares of the Company.

Further, Silver Bull warrant holders will receive, upon exercise of any Silver Bull warrant (the “Silver Bull Warrants”), for the original exercise price, one Silver Bull common share and one common share of the Company. The Company will receive $0.25 of the proceeds from the exercise of each of these Silver Bull Warrants. A total of 1,971,289 Silver Bull Warrants were outstanding at the time of the Distribution which, if all exercised, would require the Company to issue 1,971,289 common shares for proceeds of $492,822.

9 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

At the date of the Distribution, the assets transferred did not meet the definition of a business, as there were no substantive processes in place, and the transaction has been accounted for as an acquisition of assets, rather than a business combination. The transaction is accounted for in accordance with IFRS 2 – Share-based payments.

6. BESKAUGA OPTION AGREEMENT

On August 12, 2020, Silver Bull entered into the Beskauga Option Agreement with Copperbelt AG (“Copperbelt”) pursuant to which it has the exclusive right and option to acquire Copperbelt’s right, title and 100% interest in the Beskauga property located in Kazakhstan. Upon completion of Silver Bull’s due diligence on January 26, 2021, the Beskauga Option Agreement was finalized (the “Closing Date”).

On March 19, 2021, pursuant to an asset purchase agreement, Silver Bull transferred all its rights, title and interest in and to the Beskauga Option Agreement to the Company. The consideration payable by the Company to Silver Bull for the purchased assets was $1,367,668, paid through the issuance of 36,000,000 common shares of common shares in the capital of the Company (Note 4).

Under the terms of the Beskauga Option Agreement, the exploration expenditure requirements and incurred are summarized as follows:

Period	Annual Expenditure Required	Cumulative Expenditure Required	Annual Expenditure Incurred	Cumulative Expenditure Incurred
By January 26, 2022 (1 year from Closing Date)	$2 million	$2 million	$3.59 million (met)	$3.59 million (met)
By January 26, 2023 (2 years from Closing Date)	$3 million	$5 million	$0.50 million	$4.09 million
By January 26, 2024 (3 years from Closing Date)	$5 million	$10 million	n/a	$4.09 million
By January 26, 2025 (4 years from Closing Date)	$5 million	$15 million	n/a	$4.09 million

As of April 30, 2022, approximately $4.09 million of the required expenditures have been incurred under the Beskauga Option Agreement, via investment agreements with Dostyk LLP, the holder of the Beskauga exploration license.

The Beskauga Option Agreement also provides that subject to the terms and conditions set forth in the Beskauga Option Agreement, after the Company or its affiliate has incurred the exploration expenditures (outlined above), the Company or its affiliate may exercise the Beskauga Option and acquire (i) the Beskauga Property by paying Copperbelt $15,000,000 in cash, (ii) the Beskauga Main Project only by paying Copperbelt $13,500,000 in cash, or (iii) the Beskauga South Project only by paying Copperbelt $1,500,000 in cash.

In addition, the Beskauga Option Agreement provides that subject to the terms and conditions set forth in the Beskauga Option Agreement, the Company or its affiliate may be obligated to make the following bonus payments (collectively, the “Bonus Payments”) to Copperbelt if the Beskauga Main Project or the Beskauga South Project is the subject of a bankable feasibility study in compliance with Canadian National Instrument 43-101 indicating gold equivalent resources in the amounts set forth below, with (i) (A) 20% of the Bonus Payments payable after completion of the bankable feasibility study or after the mineral resource statement is finally determined and (B) the remaining 80% of the Bonus Payments due within 15 business days of commencement of on-site construction of a mine for the Beskauga Main Project or the Beskauga South Project, as applicable, and (ii) up to 50% of the Bonus Payments payable in shares of the Company’s common shares to be valued at the 20-day volume-weighted average trading price of the shares on the Toronto Stock Exchange calculated as of the date immediately preceding the date such shares are issued:

10 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

Gold equivalent resources	Cumulative Bonus Payments
Beskauga Main Project
3,000,000 ounces	$	2,000,000
5,000,000 ounces	$	6,000,000
7,000,000 ounces	$	12,000,000
10,000,000 ounces	$	20,000,000
Beskauga South Project
2,000,000 ounces	$	2,000,000
3,000,000 ounces	$	5,000,000
4,000,000 ounces	$	8,000,000
5,000,000 ounces	$	12,000,000

The Beskauga Option Agreement may be terminated under certain circumstances, including (i) upon the mutual written agreement of the Company and Copperbelt; (ii) upon the delivery of written notice by the Company, provided that at the time of delivery of such notice, unless there has been a material breach of a representation or warranty given by Copperbelt that has not been cured, the Beskauga Property is in good standing; or (iii) if there is a material breach by a party of its obligations under the Beskauga Option Agreement and the other party has provided written notice of such material breach, which is incapable of being cured or remains uncured.

7. PREPAID EXPENSES

	April 30, 2022		October 31, 2021
General Insurance	$	14,558	$	32,030
Exploration license insurance - current		93,660		—
Exploration license insurance - non-current		550,000		—
	$	658,218	$	32,030

The terms of the exploration license insurance agreements are equal to the remaining terms of the exploration licenses (7 to 8 years) from the effective dates.

11 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

8. LOANS TO EKIDOS MINERALS LLP

On March 19, 2021, pursuant to an asset purchase agreement, Silver Bull transferred $985,000 of loan receivable from Ekidos to the Company (Note 5), and loaned additional funds to Ekidos during the period ended October 31, 2021. During the three months ended January 31, 2022, the Company loaned an additional $2,136,500 to Ekidos. As of February 3, 2022, upon the acquisition of Ekidos, the loans to Ekidos eliminate on consolidation.

9. OFFICE AND EQUIPMENT

	Mining Equipment		Computer Equipment and Software		Office Equipment		Vehicles		Total
Cost
Assets acquired on acquisition		45,647		9,331		—		—	$	54,978
Additions		71,855		—		—		—		71,855
Balance, October 31, 2021		117,502		9,331		—		—		126,833
Acquisition (Note 4)		—		1,955		799		42,184		44,938
Additions		3,946		12,168		8,773		—		24,887
Balance, April 30, 2022		121,448		23,454		9,572		42,184	$	196,658
Depreciation
Depreciation expense		14,033		7,634		—		—	$	21,667
Balance, October 31, 2021		14,033		7,634		—		—		21,667
Depreciation expense		11,753		1,910		443		1,433		15,539
Balance, April 30, 2022		25,786		9,544		443		1,433	$	37,206
Carrying amounts
Balance, October 31, 2021		103,469		1,697		—		—	$	105,166
Balance, April 30, 2022		95,662		13,910		9,129		40,751	$	159,452

During the six months ended April 30, 2022, the Company acquired mining equipment and computer equipment and software and vehicles of $44,938 from acquisition of Ekidos. (Note 4).

During the period from inception on February 5, 2021 to October 31, 2021, the Company acquired mining equipment and computer equipment and software of $54,978 pursuant to an asset purchase agreement with Silver Bull (Note 5).

12 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

10. MINERAL PROPERTIES – EXPLORATION AND EVALUATION ASSET

The Company, through the asset purchase agreement (Note 5), entered into an option agreement dated August 12, 2020 with Copperbelt, to earn up to a 100% interest in the Beskauga project and through acquisition of Ekidos (Note 4), which holds other exploration licenses located in Kazakhstan

On February 3, 2022, the Company acquired Ekidos for the total consideration of $1,000 including a $4,383,656 mineral property – exploration and evaluation asset (Note 4). At the time of acquisition, the Company completed an impairment assessment and no indicators of impairment were identified.

Balance, February 5, 2021	$	—
Pursuant to asset purchase agreement (Note 5)		327,690
Common shares issued to finder (Note 12)		323,913
Balance, October 31, 2021	$	651,603
Acquisition of Ekidos (Note 4)		4,383,656
Balance, April 30, 2022	$	5,035,259

11. RIGHT-OF-USE ASSET AND LEASE LIABILITY

The Company entered into a lease agreement for its corporate head office commencing March 1, 2022, until February 28, 2026. Upon entering into this lease, the Company recognized a right-of use (“ROU”) asset in the amount of $319,521, and a corresponding lease liability in the same amount ($319,521). The lease liability is measured at amortized cost using the effective interest rate of 10.02%.

The continuity of the ROU asset and lease liability for the period ended April 30, 2022 is as follows:

Right-of-use asset

ROU asset as of October 31, 2021		$	—
	Additions		319,521
	Depreciation		(13,313	)
	Value of ROU asset as of April 30, 2022	$	306,208

Lease liability

Lease liability recognized as of October 31, 2021	$	—
New office lease		319,521
Lease payments		(15,812	)
Lease interest		2,602
Lease liability recognized as at April 30, 2022	$	306,311
Current portion		67,216
Non-current portion		239,095
Closing balance	$	306,311

13 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

Undiscounted lease payment obligations

Less than one year	$	94,875
One to four years		276,720
Total undiscounted lease liabilities	$	371,595

12. SHARE CAPITAL

a) Authorized

Unlimited number of common shares and an unlimited number of preferred shares, without par value.

b) Issued and outstanding

Preferred shares

No preferred shares have been issued.

Common shares

As of April 30, 2022, there are 51,475,150 common shares issued and outstanding.

During the six months ended April 30, 2022, the following transactions occurred:

On November 21, 2021, the Company completed the second tranche of a private placement for 2,106,000 common shares at a price of $CDN 1.00 per common share for gross proceeds of $CDN 2,106,000 ($1,670,756). The Company incurred other offering costs associated with the second tranche of private placement of $4,900 and issued in aggregate 21,630 common shares fair valued at CDN $21,630 ($17,208) as finder’s fees.

On December 20, 2021, the Company completed the third and final tranche of a private placement for 1,520,000 common shares at a price of $CDN 1.00 per common share for gross proceeds of $CDN 1,520,000 ($1,186,388). The Company paid finder’s fees totaling $CDN 50,000 ($39,026) to an agent with respect to certain purchasers who were introduced by the agent. The Company incurred other offering costs associated with the third and final tranche of private placement of $5,644 and issued in aggregate 24,420 common shares fair valued at $CDN 24,420 ($19,427) as finder’s fees.

During the period ended October 31, 2021, the following transactions occurred:

On February 5, 2021, the Company issued 100 common shares at a price of $0.01 per common share for gross proceeds of $1 in connection with the incorporation of the Company.

On March 19, 2021, the Company issued 36,000,000 common shares for gross consideration of $1,367,668 for an asset purchase agreement (Note 4).

On April 1, 2021, the Company completed a private placement for 5,035,000 common shares at a price of $CDN 0.50 per common share for gross proceeds of $CDN 2,517,500 ($2,001,352). No placement agent or finder’s fees were paid in connection with the private placement. The Company incurred other offering costs associated with the private placement of $21,761, of which $924 is included in accounts payable and accrued liabilities at October 31, 2021.

On October 21, 2021, the Company completed the initial tranche of a private placement for 6,368,000 common shares at a price of $CDN 1.00 per common share for gross proceeds of $CDN 6,368,000 ($5,107,282). The Company paid finder’s fees totaling $28,927 to an agent with respect to certain purchasers who were introduced by the agent. The Company incurred other offering costs associated with the initial tranche of private placement of $25,794, of which $52,801 and $24,798 are included in accounts payable and accrued liabilities at October 31, 2021 and January 31, 2022, respectively.

On October 25, 2021, pursuant to a finder’s fee agreement, the Company issued 400,000 common shares to UMS Project Limited Partnership for the introduction of Copperbelt AG and earning an interest in mineral property licenses from Copperbelt AG located in Kazakhstan (Note 5).

14 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

c) Stock options

Pursuant to the Company’s Equity Incentive Plan (the “Plan”) approved by the Board of Directors, the Company grants stock options to employees, directors, officers and advisors. Under the Plan, options can be granted for a maximum term of ten years and the stock options shall vest in three equal installments, with one third of the options vesting on each of the grant date, the first-year anniversary of the grant date and the second anniversary of the grant date, unless otherwise designated by the Board. Further, the exercise price shall not be less than the price of the Company’s common shares on the date of the stock option grant.

During the six months ended April 30, 2022, the Company granted options to acquire 400,000 common shares with a weighted-average grant-date fair value of $0.46 per share and an exercise price of $CDN 1.00 per share.

During the period from inception on February 5, 2021 to October 31, 2021, the Company granted options to acquire 5,220,000 common shares with a weighted-average grant-date fair value of $0.22 per share and an exercise price of $CDN 0.50 per share.

No options were exercised during the six months ended April 30, 2022 and from inception on February 5, 2021 to October 31, 2021. Stock option transactions are summarized as follows:

		Number of Options			Weighted Average Exercise Price
Balance, February 5, 2021 (incorporation)		—			$	—
	Issued		5,220,000			0.40
	Cancelled		(160,000	)		0.40
	Balance, October 31, 2021		5,060,000			0.40
	Issued		400,000			0.79
	Cancelled		200,000			0.40
	Balance, April 30, 2022		5,260,000			0.42

The following options were outstanding and exercisable at April 30, 2022:

Grant Date	Expiry Date	Exercise Price		Number of Options Outstanding		Number of Options Exercisable		Weighted Average Remaining Life
April 15, 2021	April 14, 2026		$CDN 0.50 ($0.39)		3,800,000		1,333,333		3.86
August 5, 2021	August 4, 2026		CDN 0.50 ($0.39)		800,000		266,667		4.27
September 24, 2021	September 23, 2026		CDN 0.50 ($0.39)		260,000		86,666		4.41
December 7, 2021	December 7, 2026		CDN 1.00 ($0.79)		100,000		33,333		4.61
March 2, 2022	March 2, 2027		CDN 1.00 ($0.79)		300,000		100,000		4.84
					5,260,000		1,819,999

The weighted average remaining contractual life for options outstanding at April 30, 2022 is 4.02 years. The total fair value of options granted during the six months ended April 30, 2022, was $182,052, of which $70,516 was recognized in share-based payments in the condensed interim consolidated statement of comprehensive loss with a corresponding increase in reserves. The remaining amount of $111,536 will be expensed as the remaining unvested options vest.

15 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

Total share-based payments recognized during the three and six months ended April 30, 2022, was $144,533 and $308,558, respectively (2021 – $305,876) which was expensed in the interim consolidated statements of loss and comprehensive loss.

During the six months ended April 30, 2022, $232,127 of share-based payments related to grants from prior periods. As of April 30, 2022, the remaining unrecognized compensation expenses of $217,908 relating to these previously granted options will be expensed as the remaining unvested options vest

As of April 30, 2022, the total of remaining unrecognized compensation expenses of $323,529 will be expensed.

The Company applies the fair value method using the Black-Scholes option pricing model in accounting for its stock options granted. Accordingly, share-based payments of $136,619 were recognized as personnel expenses for options granted to employees, $105,090 were recognized in directors’ fees for options granted to directors and $66,849 was recognized as exploration for options granted to employees and consultants for the six months ended April 30, 2022.

A summary of the range of assumptions used to value stock options granted for the six months ended April 30, 2022 and from inception on February 5, 2021 to October 31, 2021 is as follows:

Options	For the Period Ended April 30, 2022	For the Period from Inception on February 5, 2021 to October 31, 2021
Expected volatility	78% - 80%	75% - 79%
Risk-free interest rate	1.23%	0.46% - 1.03%
Expected life (in years)	3 – 5	3 – 5
Dividend rate	—	—

The expected volatility assumption is based on the historical and implied volatility of the comparable companies’ common share price. The risk-free interest rate assumption is based on yield curves on government zero-coupon bonds with a remaining term equal to the stock options’ expected life. The Company has not paid and does not anticipate paying dividends on its common stock. Companies are required to utilize an estimated forfeiture rate when calculating the expense for the reporting period. Based on the best estimate, management applied the estimated forfeiture rate of 0% in determining the expense recorded in the accompanying statements of comprehensive loss.

d) Shares issuable for Silver Bull Warrants

Pursuant to the Distribution (Note 5), warrant holders will receive, upon exercise of any Silver Bull Warrant, one Silver Bull common share and one common share of the Company. The Company will receive $0.25 of the proceeds from the exercise of each of these warrants.

16 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

A continuity of the Company’s shares issuable for Silver Bull Warrants is as follows:

Warrants	Shares		Weighted Average Exercise Price Per Arras share issuable		Weighted Average Exercise Price Per Silver Bull Share issuable
Balance, February 5, 2021		—	$	—	$	—
Issuable pursuant to the Distribution with Silver Bull		1,971,289		0.25		0.34
Balance, April 30, 2022 and October 31, 2021		1,971,289	$	0.25	$	0.34

No warrant were issued during the six months ended April 30, 2022.

No warrants were exercised during the six months ended April 30, 2022 and from inception on February 5, 2021 to October 31, 2021.

The following warrants were outstanding at April 30, 2022:

Expiry Date	Exercise Price		Number of Options Outstanding		Weighted Average Remaining Life
October 27, 2025		$0.25		1,971,289		3.50

13. RELATED PARTY TRANSACTIONS

Included in accounts payable and accrued liabilities at April 30, 2022 is $48,215 (October 31, 2021: $107,407) due to officers and directors of the Company for their compensation and services.

As at April 30, 2022, due from related party consists of $7,547 (October 31, 2021 - $2,808 due from Silver Bull) payment from Silver Bull for shared office expenses. The balance of due from related party is interest free and is to be repaid on demand.

During the six months ended April 30, 2022 and the period from February 5, 2021 to April 30, 2021, expenses totalling $244,450 and $101,156 were incurred by Silver Bull on the Company’s behalf. If specific identification of expenses is not practicable, a proportional cost allocation based on management’s estimation is applied.

	April 30, 2022		For the Period from February 5, 2021 to April 30, 2021
Directors’ fees	$	8,998	$	8,903
Personnel		217,930		84,951
Office and administrative		17,522		7,302
	$	244,450	$	101,156

During the six months ended April 30, 2022 and the period from February 5, 2021 to April 30, 2021, the Company paid or accrued the following amounts to officers, directors or companies controlled by officers and/or directors:

	April 30, 2022		For the Period from February 5, 2021 to April 30, 2021
Share-based payment	$	260,653	$	257,869
Directors’ fees		61,271		13,487
Personnel		226,526		78,075
	$	548,450	$	349,431

17 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

14. SUPPLEMENTAL CASH FLOW INFORMATION

As at April 30, 2022, cash and cash equivalents consist of guaranteed investment certificates of $65,194

(October 31, 2021 – $44,971) and $2,048,780 in cash (October 31, 2021 - $3,761,320) held in bank accounts.

	April 30, 2022		For the Period from February 5, 2021 to April 30, 2021
Interest paid		—	$	—
Income taxes paid		—		—
Non-cash investing and financing activities
Shares issued to agent		36,635	$	36,635
Offering costs included in accounts payable and liabilities		—		18,538
Acquisition of assets for common shares		—		1,367,668

15. FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash and cash equivalents, accounts payable and accrued liabilities, due to related party and due from related party. The Company’s risk exposure and the impact on the Company’s financial instruments are summarized below.

a) Credit risk

Credit risk is the risk of financial loss to the Company if a counter party to a financial instrument fails to meet its payment obligations. The Company is exposed to credit risk with respect to its cash and cash equivalents and amounts due from related parties. Management believes that the credit risk concentration with respect to cash and cash equivalents is remote as it maintains accounts with highly rated financial institutions.

b) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in satisfying its financial obligations as they become due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating investing and financing activities. As at April 30, 2022, the Company had working capital of $1,713,079 (October 31, 2021 - $6,493,934) and cash and cash equivalents of $2,113,974 (October 31, 2021 - $3,806,291), and is not exposed to significant liquidity risk at this time. However, since the Company is in the exploration stage, it will periodically have to raise funds to continue operations and intends to raise further financing through private placements. As at April 30, 2022, the Company expects that its working capital position provides sufficient resources available to meet its contractual obligations for the ensuing 12 months.

18 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

c) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk. The Company is not currently exposed to any significant interest rate risk or other price risk. The Company is exposed to foreign currency risk with respect to cash denominated in Canadian dollars. As at April 30, 2022, a 10% strengthening (weakening) of the Canadian dollar against the United States dollar would have increased (decreased) the Company’s comprehensive loss by approximately $118,000 for the period ended April 30, 2022.

The Company also maintains a minimum cash balance of local currency in bank account in Kazakhstan and the Company assessed such foreign currency risk as low.

The Company has not hedged any of its foreign currency risks.

d) Commodity price risk

The ability of the Company to raise funds to explore and develop its exploration and evaluation assets and the future profitability of the Company are directly related to the price of copper and gold. The Company monitors copper and gold prices to determine the appropriate course of action to be taken.

e) Fair value hierarchy

Fair value measurements of financial instruments are required to be classified using a fair value hierarchy that reflects the significant of inputs used in making the measurements. The levels of the fair value hierarchy are defined as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – Inputs for assets or liabilities that are not based on observable market data.

The Company’s financial instruments classified as Level 1 in the fair value hierarchy are cash and cash equivalents, other receivables, accounts payable and accrued liabilities and due from related party. The carrying values approximate the fair values due to the short-term maturity of these instruments. There were no transfers between fair value levels during the six months ended April 30, 2022.

16. CAPITAL MANAGEMENT

The Company defines its capital as shareholders’ equity. Capital requirements are driven by the Company’s general operations and exploration. To effectively manage the Company’s capital requirements, the Company monitors expenses and overhead to ensure costs and commitments are being paid. The Company is not subject to any externally imposed capital requirements. The Company did not change its approach to capital management during the six months ended April 30, 2022.

19 

Arras Minerals Corp.

Notes to the Condensed Interim Consolidated Financial Statements

For the six months ended April 30, 2022

(Expressed in United States dollars)

(Unaudited)

17. SEGMENTED INFORMATION

Operating segments

The Company operated in a single reportable operating segment - the acquisition, exploration and evaluation of mineral properties, with its head office function in Canada. As at April 30, 2022, the Company’s exploration and evaluation assets are currently located in Kazakhstan.

The following table details the allocation of assets included in the accompanying statement of financial position at April 30, 2022:

	Canada		Kazakhstan		Total
Cash and cash equivalents	$	1,948,000	$	166,000	$	2,114,000
Other receivables		22,000		40,000		62,000
Prepaid expenses		14,000		94,000		108,000
Due from related party		8,000		—		8,000
Office and equipment, net		99,000		61,000		160,000
Minerals properties		—		5,035,000		5,035,000
Right-of use assets		306,000		—		306,000
Other non-current assets		33,000		—		33,000
Prepaid expense non-current				550,000		550,000
	$	2,430,000	$	5,946,000	$	8,376,000

The following table details the allocation of assets included in the accompanying statement of financial position at October 31, 2021:

	Canada		Kazakhstan		Total
Cash and cash equivalents	$	3,806,000	$	—	$	3,806,000
Other receivables		16,000		—		16,000
Prepaid expenses		32,000		—		32,000
Due from related party		3,000		—		3,000
Loans to Ekidos Minerals LLP		3,178,000		—		3,178,000
Office and equipment, net		105,000		—		105,000
Mineral properties		—		652,000		652,000
	$	7,140,000	$	652,000	$	7,792,000

18. SUBSEQUENT EVENTS

i) On May 30, 2022, the Company completed a private placement for 1,091,000 common shares at a price of $CDN 1.50 per common share for gross proceeds of $CDN 1,636,500 ($1,186,388). The Company paid finder’s fees totaling $CDN 17,700 ($13,772). to an agent with respect to certain purchasers who were introduced by the agent.

ii) On June 4, 2022, 100,000 stock options expired unexercised.

20