NEO Battery Materials : Audited Consolidated Financial Statements for the Years Ended February 29, 2024 and February 28, 2023

Nofice to Reader

Audited Annual Consolidated Financial Statements of Neo Baftery Materials Ltd. for the years ended February 29, 2024 and February 28, 2023 were refiled to include the 'Other Informafion' secfion in the independent auditor's report as required by CAS 720 The Auditor's Responsibilifies Relafing to Other Informafion. This was the only change made to the financial statements. No changes were necessary for the MD&A.

Audited Consolidated Financial Statements

For the Years Ended February 29, 2024 and February 28, 2023

(Expressed in Canadian Dollars)

Independent Auditor's Report

To the Shareholders of Neo Battery Materials Ltd.:

Opinion

We have audited the consolidated financial statements of Neo Battery Materials Ltd. and its subsidiaries (the "Company"), which comprise the consolidated statement of financial position as at February 29, 2024, and the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at February 29, 2024, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 in the consolidated financial statements, which indicates that the Company had an accumulated deficit as at February 29, 2024 and incurred a net loss for the year then ended. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Emphasis of Matter - Restated Comparative Information

We draw attention to Note 17 to the consolidated financial statements, which explains that certain comparative information presented:

• for the year ended February 28, 2023 has been restated.
• as at March 1, 2022 has been derived from the consolidated statement of financial position as at February 28, 2022 (not presented herein).

Our opinion is not modified in respect of this matter.

The consolidated financial statements for the years ended February 28, 2023 and February 28, 2022 (not presented herein but from which the comparative information as at March 1, 2022 has been derived), excluding the adjustments that were applied to restate certain comparative information were audited by another auditor who expressed an unmodified opinion on those consolidated financial statements on June 26, 2023.

As part of our audit of the consolidated financial statements for the year ended February 29, 2024, we also audited the adjustments that were applied to restate certain comparative information for the year ended February 28, 2023 and as at March 1, 2022.

MNP LLP

1 Adelaide Street East, Suite 1900, Toronto ON, M5C 2V9

1.877.251.2922 T: 416.596.1711 F: 416.596.7894

In our opinion, such adjustments are appropriate and have been properly applied.

Other than with respect to the adjustments that were applied to restate certain comparative information, we were not engaged to audit, review, or apply any procedures to the consolidated financial statements:

• for the year ended February 28, 2023
• for the year ended February 28, 2022 (not presented herein)
• as at March 1, 2022

Accordingly, we do not express an opinion or any other form of assurance on those consolidated financial statements taken as a whole.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Except for the matter described in the Material Uncertainty Related to Going Concern section, we have determined that there are no other key audit matters to communicate in our report.

Other Information

Management is responsible for the other information. The other information comprises Management's Discussion and Analysis.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

1 Adelaide Street East, Suite 1900, Toronto, Ontario, M5C 2V9

1.877.251.2922 T: 416.596.1711 F: 416.596.7894 MNP.ca

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Jonathan Mac Neil.

Toronto, Ontario	Chartered Professional Accountants
June 27, 2024	Licensed Public Accountants

1 Adelaide Street East, Suite 1900, Toronto, Ontario, M5C 2V9

1.877.251.2922 T: 416.596.1711 F: 416.596.7894 MNP.ca

NEO Battery Materials Ltd.

Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)

		As at February 29,		As at February 28,		As at March 1,
		2024		2023		2022
Assets				(Restated - Note 17)		(Restated - Note 17)
Current Assets:
Cash and cash equivalents	$	941,976	$	1,626,408	$	1,247,750
Marketable securities (Note 5)		-		2,975		7,910
Prepaid expenses (Note 7)		154,717		99,617		161,865
Sales tax and other receivables (Note 6)		23,595		22,718		21,423
		1,120,288		1,751,718		1,438,948
Non-Current Assets:
Deposits		-		-		12,597
Tangible assets (Note 8)		819,244		554,443		180,529
Exploration and evaluation assets		-		-		1,344
Intangible assets (Note 9)		55,439		55,364		49,210
Prepaid expenses - long term (Note 6)		762,401		766,327		31,212
Right-of-use asset (Note 10)		196,436		167,901		203,057
	$	2,953,808	$	3,295,753	$	1,916,897
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities (Note 12)	$	509,681	$	179,236	$	166,119
Lease liability - current portion (Note 10)		48,675		10,250		21,322
		558,356		189,486		187,441
Lease liability - long term (Note 10)		167,071		167,613		184,073
Total Liabilities		725,427		357,099		371,514
Shareholders' Equity:
Share capital (Note 13)		26,060,019		22,838,207		22,311,985
Reserves (Note 13)		8,891,949		7,605,731		7,792,453
Accumulated other comprehensive income (loss)		54,082		(157,825)		(213,523)
Deficit		(32,949,382)		(28,405,116)		(28,345,532)
		2,056,668		1,880,997		1,545,383
Non-controlling interest ("NCI") (Note 4)		171,713		1,057,657		-
Total Shareholders' Equity		2,228,381		2,938,654		1,545,383
Total Liabilities and Shareholders' Equity	$	2,953,808	$	3,295,753	$	1,916,897

Nature of Operations and Going Concern (Note 1)

Contingency (Note 18)

Subsequent Events (Note 19)

Approved by the Board of Directors on June 26, 2024:

"Spencer Sung Bum Huh" , Director"Larry Okada", Director The accompanying notes are an integral part of these consolidated financial statements.

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NEO Battery Materials Ltd.

Consolidated Statements of Loss and Comprehensive Loss

(Expressed in Canadian Dollars)

		For Years Ended
		February 29, 2024		February 28, 2023
				(Restated - Note 17)
Expenses
Amortization and depreciation (Note 8 & 9)	$	172,658	$	102,540
Amortization of ROU asset (Note 10)		34,307		29,710
Advertising and marketing		183,906		46,664
Consulting and management fees (Note 14)		695,955		470,177
Corporate listing and filing fees		86,363		50,921
Investor relations		90,296		48,602
Office and general		100,344		49,393
Payroll expenses		818,120		489,558
Professional fees (Note 14)		291,046		241,864
Rent		45,855		71,130
Research and development		150,679		304,527
Stock-based compensation (Note 13)		548,928		-
Sublease income		-		(5,925)
Travel		111,598		45,054
Loss from operations		(3,330,055)		(1,944,215)
Other income (expenses)
Write-off of accounts payable and accrued liabilities		2,580		-
Impairment of E&E assets		-		(1,344)
Interest and miscellaneous income		2,586		770
Interest expense - lease liability (Note 10)		(29,991)		(30,952)
Gain (loss) on foreign exchange		365		(73)
Write-off of marketable securities (Note 5)		(2,975)		-
Unrealized loss on marketable securities		-		(4,935)
Total other income (expenses)		(27,435)		(36,534)
Net loss for the year before taxes		(3,357,490)		(1,980,749)
Current income tax (Note 16)		(150,490)		-
Net loss for the year		(3,507,980)		(1,980,749)
Foreign currency translation		(1,616)		55,698
Comprehensive loss for the year	$	(3,509,596)	$	(1,925,051)
Net loss attributable to:
Controlling equity holders of the Company		(2,840,779)		(1,675,084)
Non-controlling interest		(667,201)		(305,665)
		(3,507,980)		(1,980,749)
Loss per share attributable to controlling equity holders of the Company:
Basic and diluted	$	(0.03)	$	(0.02)
Weighted average number of common shares outstanding		104,637,154		98,324,449

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

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NEO Battery Materials Ltd.

Consolidated Statements of Changes in Equity

For the years ended February 29, 2024 and February 28, 2023 (Expressed in Canadian Dollars)

		SHARE CAPITAL
								ACCUMULATED
								OTHER						NON-
(Restated - See Note 17)								COMPREHENSIVE		ACCUMULATED		TOTAL FOR		CONTROLLING
	SHARES		AMOUNT		RESERVES		INCOME (LOSS)		DEFICIT		OWNER		INTEREST		Total
Balance - February 28, 2022	97,525,647	$	22,311,985	$	7,792,453	$	(213,523)	$	(28,345,532)	$	1,545,383	$	-	$	1,545,383
Exercise of warrants (Note 13)	1,399,999		296,368		(72,368)		-		-		224,000		-		224,000
Exercise of stock options (Note 13)	1,878,333		229,854		(114,354)		-		-		115,500		-		115,500
Issuance of shares in Korea Co (Note 4)	-		-		-		-		1,615,500		1,615,500		1,363,322		2,978,822
Foreign currency translation	-		-		-		55,698		-		55,698		-		55,698
Net loss for the year	-		-		-		-		(1,675,084)		(1,675,084)		(305,665)		(1,980,749)
Balance - February 28, 2023	100,803,979	$	22,838,207	$	7,605,731	$	(157,825)	$	(28,405,116)	$	1,880,997	$	1,057,657	$	2,938,654
		SHARE CAPITAL
								ACCUMULATED
								OTHER						NON-
								COMPREHENSIVE		ACCUMULATED		TOTAL FOR		CONTROLLING
		SHARES		AMOUNT		RESERVES		INCOME (LOSS)		DEFICIT		OWNER		INTEREST		Total
Balance - February 28, 2023		100,803,979	$	22,838,207	$	7,605,731	$	(157,825)	$	(28,405,116)	$	1,880,997	$	1,057,657	$	2,938,654
Private placement (Note 13)	11,386,860		2,716,115		927,680		-		-		3,643,795		-		3,643,795
Share issuance cost - cash	-		(64,693)		-		-		-		(64,693)		-		(64,693)
Share issuance cost - finder warrants	-		(3,693)		3,693		-		-		-		-		-
Exercise of warrants (Note 13)	1,700,000		359,890		(87,890)		-		-		272,000		-		272,000
Exercise of stock options (Note 13)	1,566,667		214,193		(106,193)		-		-		108,000		-		108,000
Stock options compensation (Note 13)	-		-		548,928		-		-		548,928		-		548,928
Reclassification of realized losses on marketable securities	-						213,523		(213,523)		-		-		-
(Note 5)		-		-
Foreign currency translation	-		-		-		(1,616)		-		(1,616)		-		(1,616)
Acquisition of shares in Korea Co (Note 4)	-		-		-		-		(1,489,964)		(1,489,964)		(218,743)		(1,708,707)
Net loss for the year	-		-		-		-		(2,840,779)		(2,840,779)		(667,201)		(3,507,980)
Balance - February 29, 2024	115,457,506	$	26,060,019	$	8,891,949	$	54,082	$	(32,949,382)	$	2,056,668	$	171,713	$	2,228,381

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

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NEO Battery Materials Ltd.

Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

		For Years Ended
		February 29, 2024		February 28, 2023
Operating Activities:				(Restated - Note 17)
Net loss for the year	$	(3,507,980)	$	(1,980,749)
Adjustment for items which do not involve cash:
Amortization (Note 8 & 9)		172,658		102,540
Amortization of ROU asset (Note 10)		34,307		29,710
Interest expense - lease liability (Note 10)		29,991		30,952
Impairment of E&E assets		-		1,344
Unrealized loss on marketable securities		-		4,935
Write-off of marketable securities		2,975		-
Write-off of accounts payable and accrued liabilities		(2,580)		-
Stock-based compensation		548,928		-
Changes in non-cash working capital components:
Accounts payable and accrued liabilities		249,205		19,796
Deposit		-		12,597
Prepaid expenses		(51,174)		(404)
Sales tax and other receivables		(877)		(1,295)
		(2,524,547)		(1,780,574)
Investing Activities:
Additions to equipment and furniture		(354,023)		(479,869)
Additions to intangible assets		(3,939)		(9,418)
Prepaid expenses - commercial plant design fees		-		(672,463)
Acquisition of shares of Korean subsidiary		(1,708,707)		-
		(2,066,669)		(1,161,750)
Financing Activities:
Exercise of warrants		272,000		224,000
Exercise of options		108,000		115,500
Proceeds from issuance of shares of Korean subsidiary		-		2,978,822
Lease payments		(54,725)		(50,616)
Private placement for cash, net		3,579,102		-
		3,904,377		3,267,706
Effect of exchange rate changes on cash		2,407		53,276
Net changes in cash and cash equivalents		(684,432)		325,382
Cash and cash equivalents - beginning of the year		1,626,408		1,247,750
Cash and cash equivalents - end of year	$	941,976	$	1,626,408
Non-cash Activities:
Equipment in accounts payable and accrued liabilities		83,820		8,619
Addition to Right-of-use asset and Lease liability		65,662		-
Issuance of finder's warrants		3,693		-
Reclassification of realized losses on marketable securities		213,523		-

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

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NEO Battery Materials Ltd.

Notes to Consolidated Financial Statements

For the Years Ended February 29, 2024 and February 28, 2023

(Expressed in Canadian Dollars)

1. Nature of Operations and Going Concern
   NEO Battery Materials Ltd. (the "Company" or "NEO Battery") is a publicly listed company incorporated under the Business Corporations Act of British Columbia on February 10, 2006 as 0748496 B.C. Ltd. On March 1, 2006, the Company changed its name to BCGold Corp, and on March 16, 2017 to Pan Andean Minerals Ltd, and again on March 2, 2021, to NEO Battery Materials Ltd. The Company is listed on the TSX Venture Exchange ("TSX.V" or the "Exchange") under the symbol "NBM". The Company focuses on developing silicon anode materials for lithium-ion batteries in electric vehicles, electronics, and energy storage systems.
   In the most recent Annual and Special Meeting dated on February 21, 2023, the Company's shareholder approved the Continuation of the Company from British Columbia to Ontario. The head office, principal address of the Company, is located at 10th Floor - 4711 Yonge Street, Toronto, Ontario, Canada, M2N 6K8. The Company's registered address is TD North, 77 King St W tower suite 700, Toronto, ON M5K 1G8.
   On April 13, 2022, the Company commenced a "Change of Business" (the "COB") application with the Exchange. In the past, the Company was a Vancouver-based junior resource company with exploration in North America. The Company deems that a classification to a Tier 2 Technology issuer on the Exchange instead of a junior Mineral Exploration and Mining issuer will better reflect the Company's long-term goal and serve its shareholders' best interests. On December 27, 2023, the Company filed the Filing Statement for COB that prepared in accordance with Exchange's policy 5.2. On January 9, 2024, the Exchange accepted COB filing application; and effective on January 11, 2024, the common shares of the Company resumed trading on Exchange.
   The Company's ability to continue as a going concern is highly dependent upon its ability to obtain the financing necessary to continue operations. The key risk to the Company's sustainability is securing funding for its research and development activities, and commercial plant construction in the near term. The Company's operation is highly influenced by the capital market environment, supply chain, inflation, geographic stability, and global business environment in general.
   These consolidated financial statements have been prepared based on accounting principles applicable to a going concern, which assumes 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 operations. The Company continues to incur operating losses, has limited financial resources, no source of operating cash flow, and no assurances that sufficient funding, including adequate financing, will be available to continue operations. These material uncertainties may cast a significant doubt on the validity of this assumption. As at February 29, 2024, the Company had an accumulated deficit of $32,949,382 (February 28, 2023 - $28,405,116 (restated - Note 17)), a net loss for the year ended February 29, 2024 of $3,507,980 (February 28, 2023 - $1,980,749 (restated - Note 17)) and a working capital of $561,932 (February 28, 2023 - $1,562,232 (restated - Note 17)).
   If the going concern assumption is not appropriate for these consolidated financial statements, adjustments could be necessary in the carrying values of assets, liabilities, reported income and expenses and the statement of financial position classifications used. Such adjustments could be material.
2. Basis of Preparation
   Statement of Compliance
   These consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"). The material accounting policies, as disclosed, have been applied consistently to all periods presented in these consolidated financial statements.

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