SEDAR Interim Financial Statements

Condensed Interim Consolidated Financial Statements For the Three and Nine Months Ended July 31, 2025 (Unaudited - Expressed in Canadian Dollars) Notice of Non-review of Condensed Interim Consolidated Financial Statements In accordance with the Canadian Securities Administrators’ National Instrument 51-102 – Continuous Disclosure Obligations, Southern Empire Resources Corp. discloses that the accompanying condensed interim consolidated financial statements have been prepared by, and are the responsibility of, the Company’s management. The attached condensed interim consolidated financial statements for the three and nine months ended July 31, 2025 have been reviewed and approved by Southern Empire’s Audit Committee and the Board of Directors but have not been reviewed by Southern Empire’s auditors. Southern Empire Resources Corp. Statements of Financial Position (See Note 1 – Nature of operations) July 31 October 31 2025 2024 Current assets Cash 1,345 $ 17,588 $ Equity investments, at fair value (Note 3) 4,830 6,095 Accounts receivable 25,728 21,652 Prepaids and advances 9,315 250 41,218 45,585 Non-current assets Reclamation bonds (5) 87,459 87,459 Equipment (4) 5,460 7,045 Exploration and evaluation assets (Note 5) 1,286,437 1,117,774 Total assets 1,420,574 $ 1,257,863 $ Current liabilities Accounts payable and accrued liabilities 2,113,621 $ 1,641,726 $ Total liabilities 2,113,621 1,641,726 Common shares (Note 7) 16,589,138 16,496,078 Contributed surplus (Note 7) 1,314,731 1,291,754 Deficit (18,596,916) (18,171,694) Total equity (693,047) (383,862) Total liabilities and equity 1,420,574 $ 1,257,864 $ ASSETS LIABILITIES EQUITY Approved on behalf of the Board “Alex Heath” “Dale Wallster” Director Director The accompanying notes are an integral part of these financial statements Southern Empire Resources Corp. Statements of Loss and Comprehensive Loss 2025 2024 2025 2024 Expenses Amortization 528 755 1,585 2,264 Management and consulting fees (Note 6) 128,030 126,000 398,530 378,000 Business and investor relations 6,474 3,620 14,581 18,306 General and administration 9,393 16,455 27,125 49,083 Professional fees 1,766 6,919 12,004 58,350 Stock-based compensation (Note 6) - - 16,038 - Transfer agent and listing fees 3,658 3,198 14,586 13,423 Travel and accomodation - - - - Shareholder communications - 187 - 3,862 149,849 157,134 484,449 523,288 Other items Unrealized gain(loss) on marketable securities 460 3,287 (1,265) (11,070) Realized gain(loss) on sale of marketable securities - - - 24,775 Realized gain on disposal of exploration and evaluation asset - - 60,492 - Net and comprehensive loss (149,389) $ (153,847) $ (425,222) $ (509,583) $ Basic and diluted loss per share (Note 6) (0.00) $ (0.00) $ (0.01) $ (0.01) $ Weighted average number of common shares outstanding - diluted 68,228,235 67,597,800 67,756,704 67,597,800 For the three months ended July 31 For the nine months ended July 31 The accompanying notes are an integral part of these financial statements 4 Southern Empire Resources Corp. Statements of Changes in Equity The accompanying notes are an integral part of these financial statements Number of shares Amount $ Contributed Surplus Deficit Total Equity Balance, October 31, 2023 65,272,800 16,470,202 $ 1,291,754 $ (6,343,588) $ 11,418,368 $ Shares issued for asset acquisition 575,000 25,875 - - 25,875 $ Net loss - - - (509,585) (509,585) $ Balance, July 31, 2024 65,847,800 16,496,077 $ 1,291,754 $ (6,853,173) $ 10,934,658 $ Numb --- er of shares Amount $ Contributed Surplus Deficit Total Equity Balance, October 31, 2024 67,597,800 16,496,078 $ 1,291,754 $ (18,171,694) $ (383,862) $ Stock options granted - - 16,035 - 16,035 $ Shares issued in the period 2,000,000 93,060 6,940 - 100,000 $ Net income - - - (425,221) (425,221) $ Balance, July 31, 2025 69,597,800 16,589,138 $ 1,314,729 $ (18,596,915) $ (693,047) $ 5 Southern Empire Resources Corp. Statements of Cash Flows For the nine months ended July 31, 2025 2024 Cash flows from Operating Activities Net income (loss) (425,221) $ (509,585) $ Items not affecting cash Amortization 1,585 2,264 Share-based compensation 16,038 - Unrealized (gain) loss on equity investments 1,265 10,431 Realized (gain) loss on sale of marketable securities - (24,775) Net changes in non-cash working capital items Accounts receivable (4,076) 58,887 Prepaids (9,064) 14,025 Accounts payable and accrued liabilities 471,896 584,330 52,423 135,577 Cash flows from Investing Activities Sale of marketable securities - 204,247 Increase in exploration and evaluation asset (168,666) (367,870) (168,666) (163,623) Cash flow from Financing Activities Issuance of common shares 100,000 - - - 100,000 - Net change in cash during the period (16,243) (28,046) Cash, beginning of period 17,588 48,551 Cash, end of period 1,345 $ 20,505 $ The accompanying notes are an integral part of these financial statements Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 6 1. NATURE OF OPERATIONS Southern Empire Resources Corp. (“Southern Empire”, the “Company” or the “Corporation”) is focused on the acquisition, exploration and evaluation of metals and minerals resource properties. Southern Empire’s head office is at Suite 400 – 789 West Pender Street, Vancouver, British Columbia, Canada V6C 1H2. As of July 31, 2024, Southern Empire’s exploration and development projects included the Oro Cruz Project in California, U.S.A, as well as the Pedro Gold Project, VLM Project, Centauro and La Loma Projects in Mexico. Going concern These financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Corporation will continue in operation for the foreseeable future and will be able to realize its assets and discharge its obligations in the normal course of operation. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but not limited to twelve months from the end of the reporting period. The use of these principles may not be appropriate. To date, the Corporation has not earned significant revenue and is considered to be in the exploration and evaluation stage. The investment in, and expenditures on, exploration and evaluation assets comprise a significant portion of the Corporation’s assets. Mineral exploration and development is highly speculative and involves inherent risks. Realization of the Corporation’s investment in these assets is dependent upon the renewed legal ownership of the claims and whether an economically viable operation can be established. In addition, it has not yet been determined whether the Corporation’s properties contain ore reserves that are economically recoverable. There can be no assurance that current exploration programs will result in the discovery of --- economically viable quantities of ore. While the rewards if an ore body is discovered can be substantial, few properties that are explored are ultimately developed into producing mines. As at July 31, 2025, the Corporation’s current cash resources are insufficient to cover the expected expenditures in fiscal 2025. The Corporation’s ability to continue as a going concern is dependent on being able to obtain the necessary financing to satisfy its liabilities as they become due. There can be no assurances that management will be successful in securing adequate financing. The Corporation reported losses in the first nine months of fiscal 2025 of 484,448 and (2024 - $509,583), has an accumulated deficit of $18,596,916 (2024 - $6,853,175) and has working capital deficiency of $2,072,402 (2024 – $1,352,927). These circumstances and the need for continued financing to further successful exploration may cast significant doubt as to the Corporation’s ability to continue as a going concern. The significant accounting policies used in the preparation of these annual financial statements are set out below. These policies have been consistently applied to all the periods presented. These financial statements do not include any adjustments to the carrying values of assets and liabilities that might be necessary if the Corporation is unable to continue as a going concern. Such adjustments could be material. These consolidated quarterly financial statements are prepared on the basis that Southern Empire will continue as a going concern, which assumes the ability to continue in operation for the foreseeable future and to realize its assets and discharge its liabilities and commitments in the normal course of operations. Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 7 2. SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES AND JUDGEMENTS Basis of presentation, principals of consolidation and statement of compliance These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the IFRS Interpretations Committee (“IFRIC”) applicable to the preparation of interim financial statements, including International Accounting Standard 34 (“IAS 34”), Interim Financial Reporting. Subsidiaries are entities controlled by the Company and are included in the consolidated financial statements from the date that control commences until the date that control ceases. These condensed interim consolidated financial statements include the accounts of Southern Empire and its wholly owned subsidiary, SMP Gold Corp., a company incorporated in Nevada, USA. All inter-company transactions and balances were eliminated in preparing these financial statements. The accounting policies of subsidiaries are changed if necessary to align them with the policies adopted by Southern Empire. These condensed interim consolidated financial statements should be read in conjunction with Southern Empire’s annual audited financial statements for the years ended October 31, 2024 and 2023, which have been prepared in accordance with IFRS as issued by the IASB. These condensed interim consolidated financial statements have been prepared on a historical cost basis, except for financial instruments which are --- classified as fair value through profit or loss. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information. These condensed interim consolidated financial statements were prepared by management and reviewed by the Audit Committee and approved and authorized for issuance by the Board of Directors on September 26, 2025. The functional currency of Southern Empire and its subsidiaries is the Canadian dollar. Foreign currency transactions are translated into the functional currency of the Company using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate in effect at the financial statement date. Exchange gains or losses arising from these translations are recognized in profit or loss for the reporting period. 3. MARKETABLE SECURITIES As at July 31, 2025 and October 31, 2024, Southern Empire’s investments consisted of equity interests in companies involved with gold exploration: Cost FMV Cost FMV Lincoln Gold Mining Inc. 25,300 $ 4,830 $ 25,300 $ 6,095 $ 25,300 $ 4,830 $ 25,300 $ 6,095 $ July 31, 2025 October 31, 2024 The Company acquired no additional marketable securities during the three and nine months ended July 31, 2024. Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 8 4. EQUIPMENT Computers and equipment Cost: Balance at October 31, 2024 and July 31, 2025 $ 33,534 Accumulated amortization: Balance at October 31, 2023 $ 23,470 Amortization expense 3,019 Balance at October 31, 2024 26,489 Amortization expense 1,583 Balance at April 30, 2025 28,074 Total balance at October 31, 2024 $ 7,045 Total balance at July 31, 2025 $ 5,460 5. EXPLORATION AND EVALUATION ASSETS Southern Empire classifies its exploration and evaluation gold properties into three geographical regions, namely California, Nevada and Mexico. The following is a summary of the properties: Oro Cruz Pedro VLM Centauro La Loma Suaqui Verde Total California Mexico Mexico Mexico Mexico Mexico October 31, 2023 $10,391,119 $751,205 $202,969 $382,941 $70,346 $ - $11,798,580 Acquisition and renewal - - 25,875 - - - 25,875 Property maintenance 105,517 63,173 3,069 36,424 - 24,550 232,733 Geology & geophysics - 1,134 - 1,739 - 254 3,127 Drilling & assay - - - - - - - Camp & fieldwork 300 - - - - 252 552 Environmental & permitting 165,755 - - 54 - 165,809 Impairment (10,662.690) - - (421,157) - (25,055) (11,108,902) October 31, 2024 $1 $815,512 $231,913 $1 $70,346 $ 1 $1,117,774 Acquisition & renewal - - - - - - - Property maintenance 10,012 58,472 64,439 18,097 - - 151,020 Geology & geophysics - 1,337 - 985 - - 2,322 Camp & fieldwork 1,222 100 - - - - 1,322 Environmental & permitting 13,998 - - - - - 13,998 July 31, 2025 $25,233 $875,421 $296,352 $19,083 $70,346 $ 1 $1,286,436 Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 9 5. EXPLORATION AND EVALUATION ASSETS (continued) Oro Cruz Project, California, U.S.A. Lincoln Gold US Corp. Option Agreements Southern Empire acquired options to earn up to a 75% interest in the Oro Cruz Project, located in Imperial County, California. O --- n June 22, 2020, Southern Empire entered into another option agreement to acquire the remaining 25% of the Oro Cruz Project from Ronald K. Netolitzky (“Netolitzky”), a director of Southern Empire, bringing its total potential interest to 100%. The Oro Cruz Project option agreements are summarized as follows: Southern Empire has an option agreement with Lincoln Gold US Corp. (“Lincoln”) to acquire a total of a 75% interest in the Oro Cruz Project from Lincoln. The pertinent business terms of this option agreement are: Cash payments to Lincoln: - US$ 10,000 initial payment (paid) - US$ 25,000 paid on or before February 15, 2020 (paid) - US$ 25,000 paid on or before February 15, 2021 (paid) - US$ 25,000 paid on or before February 15, 2022 (paid)* - US$ 25,000 paid on or before February 15, 2023 (paid)* * Southern Empire settled the final two payments for a one-time payment of US$41,000 pursuant to a settlement agreement dated April 7, 2021. Cash payments to ADGIS, Inc. (“ADGIS”) who granted an underlying option (the “Hercules Claims”) to Lincoln: - US$ 50,000 by May 15, 2019 (paid) - US$ 50,000 by April 15, 2020 (paid) - US$ 100,000 by April 15, 2021 (paid) - US$ 100,000 by April 15, 2022 (paid) - US$ 100,000 by April 15, 2023 (paid) Exploration expenditures: - US$ 200,000 exploration expenditures acknowledged as incurred to October 1, 2019 (incurred) - US$ 400,000 cumulative exploration expenditures to be incurred before October 1, 2020 (incurred) - US$ 700,000 cumulative exploration expenditures to be incurred before October 1, 2021 (incurred) - US$ 1,000,000 cumulative exploration expenditures to be incurred before October 1, 2022 (incurred) - US$ 1,600,000 cumulative exploration expenditures to be incurred before October 1, 2023 (incurred) Royalties: - 2% Net Smelter Return Royalty (“NSR”) from production within the Hercules Claims boundary (the “Hercules Royalty”) - 1% NSR on production within a 1-mile radius of the Hercules Claims boundary (“Radius Royalty”) - Southern Empire can reduce the Hercules Royalty by 0.5% and the Radius Royalty by 0.5% collectively with a cash payment of US$500,000 to ADGIS. - Southern Empire can reduce the Hercules Royalty by an additional 0.5% with an additional payment of US$500,000 to ADGIS. Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 10 5. EXPLORATION AND EVALUATION ASSETS (continued) Ronald K. Netolitzky Option Agreement On June 22, 2020, Southern Empire entered into an option agreement with Netolitzky to acquire, at cost, the remaining 25% of the Oro Cruz Project in exchange for cash payments of $440,000. On September 15, 2022, Southern Empire exercised its option and acquired the 25% interest from Netolitzky. Option payments paid were as follows: - $ 140,000 on TSX Venture Exchange approval (paid) - $ 100,000 on or before the first anniversary date, August 4, 2021 (paid) - $ 100,000 on or before the second anniversary date, August 4, 2022 (see amendment below) - $ 100,000 on or before the third anniversary date, August 4, 2023 (see amendment below) During the year ended October 31, 2022, Southern Empire entered into an Amendment Agreement with Netolitzky, the chairman and a director of the Company, to amend the terms of June 22, 2020 option agreement that granted Southern Empire the option to acquire 25% of the Oro Cruz property in exchange for cash payments of $4 --- 40,000. Option payments totaling $240,000 had been paid to Netolitzky. The terms of the Amendment Agreement allowed Southern Empire to exercise its option to acquire the 25% interest in Oro Cruz by issuing 2,000,000 common shares to Netolitzky in lieu of the final two option payments otherwise totaling $200,000. On September 15, 2022, the Amendment Agreement and the transactions contemplated therein were accepted for filing by the Exchange and Southern Empire issued the 2,000,000 common shares (at a value of $120,000) which were subject to restriction on resale for a period of four months from their date of issuance. Oro Cruz - American Girl Mine Property On September 14, 2020, Southern Empire executed a Purchase and Sale Agreement (the “PSA”) to acquire, at cost, the American Girl Mine Property from Mackenzie Corporation, a company controlled by the President and CEO of Southern Empire. In accordance with the terms of the PSA, Southern Empire acquired a 100% interest in seven privately owned, patented mining claims and 10 Bureau of Land Management claims covering the former American Girl mine by paying a total of US$330,000 to Mackenzie Corporation. Eastgate Gold Project, Nevada, U.S.A. Southern Empire acquired an 85% interest in the Eastgate Gold Project, located in Churchill County, Nevada. The Eastgate Gold Project is subject to a 3% Net Smelter Royalty payable to Blue Ridge Gold LLC, a privately held company that was the original property vendor. During the year ended October 31, 2023, Southern Empire determined that the value of Eastgate would be adjusted to $nil as a result of there being no current or planned exploration activities and negative drilling results. This required an impairment expense of $2,099,478. Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 11 5. EXPLORATION AND EVALUATION ASSETS (continued) Pedro Gold Project, Durango, México On July 23, 2021, Southern Empire entered into an option agreement with Commander Resources Ltd. (“Commander”) which allows Southern Empire to acquire a 100% beneficial interest in the Pedro Gold Project in northeastern Durango State, Mexico. Pursuant to the terms of the option agreement, to earn its interest Southern Empire must complete the following: - $25,000 cash payment and the issuance of 100,000 common shares of Southern Empire on the Execution Date (paid and issued at a value of $14,500). - On or before February 3, 2023, pay an additional $125,000 or issuing such amount of common shares having a value of $125,000 (paid $25,000 cash and issued 1,000,000 shares at a value of $100,000). - On or before February 3, 2024, pay an additional $250,000 or issuing such amount of common shares having a value of $250,000*. - On or before February 3, 2025, pay an additional $300,000 or issuing such amount of common shares having a value of $300,000. - Incurring exploration expenditures totaling $1,500,000 as follows: o $ 400,000 by February 3, 2023 (incurred). o $ 1,100,000 by February 3, 2025. Commander will retain a 2% NSR interest on future production from the Pedro Gold Project. The Exchange accepted the Pedro Gold Project option agreement for filing on February 3, 2022 (the “Execution Date”). * *Southern Empire is currently negotiating an extension to the agreement terms for the payments and share issuances due in 2024 and 2025 on the Pedro Gold Project. V --- LM Project, México On December 24, 2021 (amended on January 11, 2024), Southern Empire entered into an option agreement with Riverside Resources Inc. (“Riverside”) that grants Southern Empire the opportunity to acquire a 100% interest in the VLM Project located in northwestern México. Southern Empire may exercise its option to acquire a 100% interest in the VLM Project by: - paying to Riverside a total of $112,500 as follows: o $25,000 on signing (paid). o an additional $37,500 on or before January 12, 2023 (paid). o an additional $50,000 on or before March 30, 2024 (paid). - issuing a total of 1,625,000 common shares as follows; o 500,000 common shares on or before January 12, 2022 (issued at a value of $55,000). o An additional 550,000 common shares on or before January 12, 2023 (issued at a value of $55,000). o an additional 575,000 common shares on or before February 2, 2024 (issued). Riverside will retain an NSR interest on future production from the VLM Project of 2.5% on precious metals and 1.75% on base metals. These royalties may be reduced to 1% on precious metal production and 0.5% on base metal production by payments of an additional $4,000,000 within 10 years of the Exchange filing acceptance date. Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 12 5. EXPLORATION AND EVALUATION ASSETS (continued) Centauro, Mexico During the year ended October 31, 2022, Southern Empire acquired the option to earn 100% of the Centauro Gold Project located in Chihuahua, Mexico, from a Mexican vendor by way of an amending agreement with Commander, subject to a 3% NSR payable to the vendor, which can be reduced by 2% in exchange for a cash payment of US$2,000,000. The terms of the Option Agreement are as follows: Southern Empire may exercise its option to acquire a 100% interest in the Centauro Gold Project by: - paying to the Mexican Vendor a total of USD$750,000 as follows: o US$35,000 on signing (paid). o an additional US$40,000 on the one-year anniversary of signing*. o an additional US$80,000 on the two-year anniversary of signing. o an additional US$295,000 on the three-year anniversary of signing. o an additional US$300,000 on the four-year anniversary of signing. - incurring US$800,000 of exploration expenditures as follows: o $100,000 in year-one of the option (incurred). o an additional US$200,000 in year-two of the option. o an additional US$250,000 in year-three of the option. o an additional US$250,000 in year-four of the option. - issuing 1,500,000 common shares of Southern Empire to Commander as follows: o 200,000 on signing (issued at a value of $20,000). o an additional 200,000 on the one-year anniversary of signing*. o an additional 200,000 on the two-year anniversary of signing. o an additional 400,000 on the three-year anniversary of signing. o an additional 500,000 on the four-year anniversary of signing. *During the year ended October 31, 2024, Southern Empire made the decision to not pursue the Centauro project (Note 12). As such, the property was impaired to a carrying value of $1. On February 25, 2025 Southern Empire sold its option agreement on the project in exchange for cash consideration of USD$975,000 payable over five years in accordance with the following schedule: • $25,000 (U.S.) (plus value-added tax (VAT)) upon the execution of the assignment agreements (received); • $25,000 (U. --- S.) (plus VAT) on the first anniversary of the execution date; • $25,000 (U.S.) (plus VAT) on the first anniversary of the execution date; • $25,000 (U.S.) (plus VAT) on the first anniversary of the execution date; • $25,000 (U.S.) (plus VAT) on the first anniversary of the execution date; • $350,000 (U.S.) (plus VAT) on the fifth anniversary of the execution date; • $500,000 (U.S.) (plus VAT) upon filing of a preliminary economic assessment technical report regarding the Centauro gold project. La Loma, Mexico During the year ended October 31, 2022, Southern Empire acquired the La Loma Gold Project in Chihuahua, Mexico by staking. Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 13 5. EXPLORATION AND EVALUATION ASSETS (continued) Suaqui Verde In the year, Southern Empire began the acquisition of the Suaqui Verde project in Mexico. There is material uncertainty as to the underlying ownership and, as such, the property was impaired to a value of $1. Reclamation bonds Southern Empire holds reclamation bonds of $87,459 (2024 - $87,459) with the Bureau of Land Management with respect to its properties in California. 6. RELATED PARTY TRANSACTIONS Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of Southern Empire. Key management personnel consist of executive and non- executive members of the Company’s Board of Directors and corporate officers. The remuneration of key management personnel are as follows: For the nine months ended July 31, 2025 2024 Management fees to officers 297,000 $ 297,000 $ Stock based compensation 10,023 - Total 307,023 $ 297,000 $ As at July 31, 2025, $1,424,353 (July 31, 2024 - $ 914,212) was included in accounts payable owing to directors, officers, and companies controlled or affiliated with directors and officers of Southern Empire in relation to fees and reimbursement of expenses. 7. SHARE CAPITAL a) Authorized: Unlimited common shares without par value. Unlimited preferred shares issuable in series. b) Issued and outstanding: 69,597,800 common shares as at July 31, 2025 c) Transactions: On January 12, 2023, Southern Empire issued 550,000 common shares (at a value of $55,000) to Riverside, in accordance with the option agreement on the VLM Project (Note 5). On February 16, 2023, Southern Empire issued 200,000 common shares (at a value of $20,000) to Jesus Pascoe, in accordance with the option agreement on the Centauro Property (Note 5). On February 22, 2023, Southern Empire issued 1,000,000 common shares (at a value of $100,000) to Commander Resources Ltd., in accordance with the option agreement on the Pedro Project (Note 5). On February 2, 2024, Southern Empire issued 575,000 common shares (at a value of $25,875) to Riverside, in accordance with the option agreement on the VLM Project (Note 5) On July 2, 2025, Southern Empire issued 2,000,000 common share units at a price of $0.05 per unit. Each unite consisted of one common share and one common share purchase warrant with an exercise price of $0.10 for a term of 36-months. Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 14 7. SHARE CAPITAL (Continued) d) Escrowed shares: As at July 31, 2025, there were nil (Octo --- ber 31, 2024 – nil) common shares held in escrow. e) Stock options: The Directors of Southern Empire adopted a stock option plan on March 13, 2020, as amended on July 26, 2022 (the “Option Plan”). The Option Plan provides that, subject to the requirements of the Exchange, the aggregate number of securities reserved for issuance will be 10% of the number of Southern Empires’ common shares issued and outstanding at the time such options are granted. Options to purchase common shares of the Company (“Options”) may be granted under the Option Plan to such directors, officers, employees, management or consultants of Southern Empire and its affiliates, if any, as the Board of Directors may from time to time designate. The Option Plan provides that the number of common shares that may be reserved for issuance to any one individual upon exercise of all stock options held by such individual may not exceed 5% of the issued common shares, if the individual is a director, officer or employee 2% of the issued common shares, if the individual is a consultant or is engaged in providing investor relations services, in a twelve-month basis, unless disinterested shareholder approval is obtained. All options granted under the Option Plan will expire not later than the date that is ten years from the date that such options are granted. Options terminate earlier as follows: (i) immediately in the event of dismissal with cause; (ii) 90 days from the date of termination other than for cause; or (iii) one year from the date of death or disability. During the nine-months ended July 31, 2025, Southern Empire granted 1,680,000 Options exercisable at a price of $0.05 per option for a term of five years from the date of issuance to directors, officers and consultants of Southern Empire. These options vested immediately and during the year the Company recorded $16,078 of share-based payments. During the year ended October 31, 2022, Southern Empire granted 1,000,000 Options exercisable at a price of $0.11 per option for a term of five years from the date of issuance to director, officers and consultants of Southern Empire. These options vested immediately and during the year the Company recorded $70,878 of share-based payments. During the year ended October 31, 2022, 200,000 of these options were exercised for cash proceeds of $22,000. During the year ended October 31, 2023, Southern Empire granted 1,740,000 Options exercisable at a price of $0.07, 400,000 Options exercisable at a price of $0.30 and 100,000 Options exercisable at a price of $0.11. These options have a term of five years and vested immediately upon grant. The Company recorded $117,614 of share-based payments in respect of these options. Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 15 7. SHARE CAPITAL (Continued) The following weighted average assumptions were used for the valuation of stock options: July 31, 2025 October 31, 2024 Risk-free interest rate 2.81% 4.02% Expected life of options 5 years 5 years Annualized volatility 80% 106% Dividend rate 0.00% 0.00% Forfeiture rate 0.00% 0.00% Weighted average fair value per option $ 0.0095 $ 0.05 The changes in the stock options for the period ended July 31, 2025 are as follows: Number Weighted Average Exercise Price Balance, October 31, 2024 7,740,000 $ 0.23 Stock options expired (3,470,000) $ (0.30) Stock options grant --- ed 1,680,000 $ 0.05 Balance, April 30, 2025 5,950,000 $ 0.08 The balance of options outstanding as at July 31, 2025 is as follows: Expiry Date Number Outstanding Number Exercisable Exercise Price Remaining Life - Years April 30, 2026 730,000 730,000 $0.30 1.00 March 11, 2026 100,000 100,000 $0.30 0.86 June 10, 2026 400,000 400,000 $0.30 1.11 January 18, 2027 700,000 700,000 $0.11 1.72 February 3, 2027 100,000 100,000 $0.11 1.76 August 28, 2028 1,740,000 1,740,000 $0.07 3.33 August 28, 2028 400,000 400,000 $0.30 3.33 August 28, 2028 100,000 100,000 $0.11 3.33 April 10, 2030 1,680,000 1,680,000 $0.05 4.95 f) Warrants A summary of the outstanding and exercisable common share purchase warrants is as follows: Balance, October 31, 2023 & 2024 8,434,000 0.15 $ Expired (8,434,000) (0.15) Issued 2,000,000 0.10 Balance, April 30, 2025 2,000,000 0.10 $ Number of Warrants Weighted Average Exercise Price Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 16 7. SHARE CAPITAL (Continued) g) Per share amounts For the nine months ended July 31, 2025 2024 Loss attributable to common shareholders $ (425,221) ($509,585) Weighted average number of common shares - basic 67,756,704 67,597,800 Weighted average number of common shares - diluted 67,756,704 67,597,800 Loss per common share - basic $ (0.01) ($0.01) Loss per common share - diluted $ (0.01) ($0.01) All stock options and warrants were excluded from the diluted weighted average number of shares calculation for the periods ended July 31, 2025 and 2024, as their effect would have been anti-dilutive. 8. CAPITAL MANAGEMENT Southern Empire includes equity in the definition of capital. The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support acquisition, exploration and development of exploration and evaluation assets. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of Southern Empire’s management to sustain future development of business. Southern Empire’s properties are in the exploration stage. As such, the Company is dependent upon external financings to fund activities. In order to carry out planned exploration and pay for administrative costs, Southern Empire will spend its existing working capital and raise additional funds as needed. Southern Empire will continue to assess new properties and seek to acquire an interest in additional properties if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do so. Management reviews its capital management approach on an ongoing basis and believes that this approach is reasonable. There were no changes to the Company’s approach to capital management during the three and nine months ended July 31, 2025 and 2024. Southern Empire is not subject to externally imposed capital requirements. 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT For disclosure purposes, all financial instruments measured at fair value are categorized into one of three hierarchy levels, described below. Each level is based on the transparency of the inputs used to measure the fair values of assets and liabilities: Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – inputs other than quoted prices includ --- ed in Level 1 that are observable for the asset or liability, either directly (i.e., as in prices) or indirectly (i.e., derived from prices); and Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 17 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) The following table are financial assets measured at fair value by level within the fair value hierarchy: July 31, 2025 Level 1 Level 2 Level 3 Total Assets: Cash $ 1,345 $ - $ - $ 1,345 Marketable securities $ 4,830 $ - $ - $ 4,830 Reclamation bonds $ 87,459 $ - $ - $ 87,459 July 31, 2024 Level 1 Level 2 Level 3 Total Assets: Cash $ 20,505 $ - $ - $ 20,505 Marketable securities $ 5,750 $ - $ - $ 5,750 Reclamation bonds $ 87,459 $ - $ - $ 87,459 Southern Empire holds various forms of financial instruments. The nature of these instruments and the Company’s operations expose the Company to concentration risk, credit risk, currency risk, price risk, commodity price risk and liquidity risk. Southern Empire manages its exposure to these risks by operating in a manner that minimizes its exposure to the extent practical. a) Concentration risk – as at July 31, 2025, all of Southern Empire’s cash is held at one Canadian national financial institution. As a result, the Company was exposed to all of the risks associated with those institutions. Concentration risk also exists in marketable securities because Southern Empires investment portfolio primarily consists of the securities of one issuer. b) Credit risk – Southern Empire is exposed to credit risk, which is the risk that a counterparty will fail to perform an obligation or settle a liability, resulting in financial loss to the Company. The Company manages exposure to credit risk by adopting credit risk guidelines that limit transactions according to counterparty credit worthiness. The maximum exposure associated with accounts receivable is the carrying value. c) Currency risk – Relates to Southern Empires operations in the United States and is subject to fluctuations in exchange rates and the degree of volatility of these rates. The Company does not use derivative instruments to reduce its exposure to foreign currency risk. Southern Empire does not have material monetary assets or liabilities in foreign currencies. d) Price risk – Southern Empire’s investments designated as FVTPL are publicly traded. A 1% change in the quoted share price would not significantly impair the fair value of the investment. Changes are recorded through profit or loss. e) Commodity price risk – The value of Southern Empires exploration and evaluation assets is related to the price of commodities and the outlook for them. Commodity prices have historically fluctuated widely and are affected by numerous factors outside the Company’s control, including, but not limited to, industrial retail demand, central bank lending, forward sales by producers and speculators, level of worldwide production and short-term changes in supply and demand. Southern Empire Resources Corp. Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months July 31, 2025 and 2024 (expressed in Canadian dollars) 18 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) f) Liquidity risk – Currently, Southern Empires capita --- l is sufficient to meet business requirements in the next 12 months when taking into account cash flows from operations and the Company’s holdings of cash. Future operations or exploration programs may require additional financing primarily through equity markets, or through joint venture partnerships.