Assets

Current assets

Cash

Accounts receivable

Prepaids and other current assets

Total assets

Liabilities and Deficit

Current liabilities

Accounts payable and accrued liabilities

Due to related parties (Note 13)

Financial guarantee liability (Note 14(b))

Convertible debentures (Note 5)

Loans payable (Note 6)

Promissory notes (Note 7)

Warrant liabilities (Notes 9(a) and 9(b))

Total current liabilities

Non-current liabilities

Loans payable (Note 6)

Total liabilities

Deficit

Common shares (Note 8)

Subscriptions received

Reserves (Note 10)

Accumulated other comprehensive income

Accumulated deficit

Deficit attributable to shareholders

Non-controlling interests

Total deficit

Total liabilities and deficit

“Steven Sangha”

Director

“Ralph Anthony Pullen”

Director

Expenses

Consulting fees

Foreign exchange loss (gain)

General and administrative

Professional fees

Research and development

Wages, salaries and employment expenses

Total expenses

Loss from operations

Other income (expenses)

Accretion expense (Notes 5 and 6)

Change in financial guarantee liability (Note 14(b))

Changes in fair values of warrant liabilities (Notes 9(a) and 9(b))

Gains from extinguishment/forgiveness of debts (Note 8(d))

Loss from modification of loan (Note 6)

Interest expense

Other

Total other (loss) income

Net loss for the period

Other comprehensive income (loss) to be reclassified to profit and loss subsequently

Foreign currency translation adjustment of foreign operations

Comprehensive loss for the period

Net (loss) income attributable to:

Shareholders

Non-controlling interests (Note 11)

Comprehensive (loss) income attributable to:

Shareholders

Non-controlling interests (Note 11)

Net loss per share, basic and diluted

Weighted average shares outstanding, basic and diluted

Balance – January 31, 2025

Settlement of accounts payable and due to related parties (Notes 8(d) and 13)

Exercise of warrants (Note 8(e))

–

–

Common shares issued on conversion of debentures (Notes 5(c) and 8(f))

–

–

Share-based payments (Note 10)

Foreign currency translation adjustment of foreign operations

Net loss

Balance – April 30, 2025

Balance – January 31, 2026

Common shares issued for services (Note 8(a))

Common shares and warrants issued for cash (Note 8(b))

Common shares issued on conversion of debentures (Notes 5(c), 5(e) and 8(c))

–

–

Share-based payments (Note 10)

Foreign currency translation adjustment of foreign operations

Net loss

Balance – April 30, 2026

Operating activities

Net loss

Adjustments to reconcile net loss to net cash used in operating activities:

Accretion

Change in financial guarantee liability

Changes in fair values of warrant liabilities

Common shares issued for services

Foreign exchange loss (gain)

Gain from extinguishment/forgiveness of debts

Interest expense

Loss on modification of loan

Share-based payments

Changes in working capital accounts:

Accounts receivable

Prepaids and other current assets

Accounts payable and accrued liabilities

Due to related parties

Net cash used in operating activities

Financing activities

Proceeds from issuance of units, net

Proceeds from exercise of warrants

Repayment of loan payable

Net cash provided by financing activities

Effects of exchange rate changes on cash

Net change in cash

Cash – beginning of period

Cash – end of period

·

·

·

(a)

Basis of Compliance

These condensed consolidated interim financial statements have been prepared in accordance with IFRS® Accounting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations of the IFRS Interpretations Committee (“IFRIC”).

These condensed consolidated interim financial statements are unaudited and have been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting, using accounting policies which are consistent with IFRS as issued by the IASB. They do not include all of the information required for full annual consolidated financial statements in compliance with IAS 1, Presentation of Financial Statements.

These condensed consolidated interim financial statements follow the same accounting policies and methods of application as the most recent annual audited consolidated financial statements for the year ended January 31, 2026 and should be read in conjunction with those audited consolidated financial statements. These condensed consolidated interim financial statements were approved by the Board of Directors and authorized for issue on June 26, 2026.

(b)

Basis of Measurement and Presentation

These condensed consolidated interim financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value and are presented in Canadian dollars.

(c)

Basis of Consolidation

Subsidiaries

The condensed consolidated interim financial statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Subsidiaries are fully consolidated from the date on which the Company obtains control and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same period as the parent company, using consistent accounting policies. The Company has consolidated the assets, liabilities, revenues and expenses of its subsidiaries after the elimination of inter-company transactions and balances.

The consolidating entities include:

% of ownership

Jurisdiction

BetterLife Pharma Inc.

Parent

Canada

MedMelior Inc.

91%

Canada

Blife Therapeutics Inc.

100%

Canada

Altum Pharma (Australia) Pty Ltd.

91%⁽¹⁾

Australia

Altum Pharmaceuticals (HK) Limited

91%⁽¹⁾

Hong Kong

Non-controlling interests

Non-controlling interests (“NCI”) represents the non-controlling shareholders’ portion of the net assets and net loss of MedMelior Inc. (“MedMelior”) and its wholly-owned subsidiaries. Changes to the Company’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

(d)

Use of Estimates and Judgments

The preparation of the condensed consolidated interim financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

For critical judgments used by management, refer to the Company’s most recent annual consolidated financial statements for the year ended January 31, 2026.

(e)

Foreign Currency

The Company’s presentation currency is the Canadian dollar. The functional currency of the parent entity, BetterLife Pharma Inc., and its subsidiaries, MedMelior and Blife Therapeutics Inc., is the Canadian dollar. The functional currency of the Hong Kong subsidiary, Altum Pharmaceuticals (HK) Limited, is the Hong Kong dollar. The functional currency of the Australian subsidiary, Altum Pharma (Australia) Pty Ltd., is the Australian dollar.

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Company and its subsidiaries at the exchange rate in effect at the transaction date. Monetary assets and liabilities denominated in other than the functional currency are translated at the exchange rates in effect at the financial position date. The resulting exchange gains and losses are recognized in the condensed consolidated interim statements of loss and comprehensive loss. Non-monetary assets and liabilities denominated in other than the functional currency that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value is determined. Non-monetary items that are measured in terms of historical cost in other than the functional currency are translated using the exchange rate at the date of transaction.

Foreign operations

For consolidation purposes, the assets and liabilities of foreign operations are translated to the presentation currency using the exchange rate prevailing at the financial position date. The income and expenses of foreign operations are translated to the presentation currency using the average rates of exchange during the period. All resulting exchange differences are recorded as other comprehensive income or loss and accumulated in a separate component of shareholders’ equity or deficit, described as foreign currency translation adjustment.

(f)

Comprehensive Income (Loss)

Comprehensive income or loss is the change in net assets arising from transactions and other events and circumstances from non-owner sources. Financial assets that are measured at fair value through other comprehensive income will have revaluation gains and losses included in other comprehensive income or loss until the asset is removed from the condensed consolidated interim statement of financial position. Certain gains and losses on the translation of amounts between the functional and presentation currency of the Company are included in other comprehensive income or loss. Gains and losses on translation of foreign subsidiaries are initially recognized in other comprehensive income or loss. Accumulated other comprehensive income or loss on translation of foreign subsidiaries are reclassified from equity to deficit on disposal of the subsidiary.

(g)

Income (Loss) Per Share

The Company presents the basic and diluted earnings or loss per share data for its common shares, calculated by dividing the earnings or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted earnings or loss per share is determined by adjusting the earnings or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares. For the three months ended April 30, 2026 and 2025, basic net loss per share equals diluted net loss per share as the Company incurred net losses during these years and the Company’s stock options and warrants were anti-dilutive.

Balance, January 31, 2025

Accretion and interest

Conversion (Notes 5(a), 5(c), 5(d), 8(f) and 13)

Balance, January 31, 2026

Loss on modification (Notes 5(b) and 5(c))

Accretion and interest

Conversion (Notes 5(c), 5(e), 8(c) and 13)

Balance, April 30, 2026

(a)

On December 31, 2023, the Company issued unsecured convertible debentures for $300,000. The debentures bear interest at 10% per annum, have a maturity date of June 30, 2025 and are convertible into units, with each unit consisting of one common share and one share purchase warrant, at a conversion price equal to $0.10 per unit. Each share purchase warrant received on conversion will have an exercise price of $0.10 per warrant and will expire on December 31, 2025. The effective interest rate had been determined to be 15.1% per annum.

In May and July 2024, principal and accrued interest of $300,000 and $3,534, respectively, were converted into a total of 3,035,342 common shares and 3,035,342 share purchase warrants of the Company. Carrying value of $263,498 of convertible debentures was allocated to common shares. The residual method was used to allocate the proceeds between the common shares and the warrants which resulted in a value of $nil allocated to the warrants.

In May 2025, accrued interest totaling $993 was converted into a total of 9,932 common shares and 9,932 share purchase warrants of the Company. Carrying value of $844 of accrued interest was allocated to common shares. The residual method was used to allocate the proceeds between the common shares and the warrants which resulted in a value of $149 allocated to the warrants.

(b)

On February 29, 2024, the Company issued unsecured convertible debentures for $65,000. The debentures bear interest at 10% per annum, have maturity date of February 28, 2026 and are convertible into units, with each unit consisting of one common share and one share purchase warrant, at a conversion price equal to $0.10 per unit. Each share purchase warrant received on conversion will have an exercise price of $0.10 per warrant and will expire on August 31, 2026. The effective interest rate had been determined to be 13.6% per annum.

Transaction costs totaling $8,955 consisted of the following: 78,000 brokers’ warrants with fair value of $3,755 and brokers’ fee of $5,200. Brokers’ warrants entitle the holder to purchase one common share at an exercise price of $0.10 and expire on February 28, 2026. The fair values of brokers’ warrants were determined using the fair values of the common shares issued as values of services provided could not be estimated reliably. The Company used the Black-Scholes option pricing model to value the brokers’ warrants.

In July 2024, principal of $35,000 was converted into 350,000 common shares and 350,000 share purchase warrants of the Company. Carrying value of $28,077 of convertible debentures was allocated to common shares. The residual method was used to allocate the proceeds between the common shares and the warrants which resulted in a value of $nil allocated to the warrants.

In April 2026, maturity date for the remaining $30,000 in principal amount of convertible debentures was extended to February 28, 2027. During the three months ended April 30, 2026, the Company recorded a loss on modification of debts of $2,895 in its condensed consolidated interim statements of loss and comprehensive loss (three months ended April 30, 2026 - $nil).

(c)

On March 28, 2024, the Company issued unsecured convertible debentures for $780,000. The debentures bear interest at 10% per annum, have maturity date of March 27, 2026 and are convertible into units, with each unit consisting of one common share and one share purchase warrant, at a conversion price equal to $0.10 per unit. Each share purchase warrant received on conversion will have an exercise price of $0.10 per warrant and will expire on September 27, 2026. The effective interest rate has been determined to be 13.4% per annum.

Transaction costs totaling $19,906 consisted of the following: 168,000 brokers’ warrants with fair value of $8,706 and brokers’ fee of $11,200. Brokers’ warrants entitle the holder to purchase one common share at an exercise price of $0.10 and expire on March 27, 2026. The fair values of brokers’ warrants were determined using the fair values of the common shares issued as values of services provided could not be estimated reliably. The Company used the Black-Scholes option pricing model to value the brokers’ warrants.

In July 2024, principal and accrued interest of $295,000 and $3,370, respectively, were converted into a total of 2,983,699 common shares and 2,983,699 share purchase warrants of the Company. Carrying value of $241,174 of convertible debentures was allocated to common shares. The residual method was used to allocate the proceeds between the common shares and the warrants which resulted in a value of $nil allocated to the warrants.

In March 2025, principal and accrued interest of $50,000 and $4,233, respectively, were converted into a total of 542,329 common shares and 542,329 share purchase warrants of the Company. Carrying value of $54,233 of convertible debentures was allocated to common shares (Note 8(f)). The residual method was used to allocate the proceeds between the common shares and the warrants which resulted in a value of $5,093 allocated to the warrants (Note 9(c)).

In May and October 2025, principal and accrued interest of $200,000 and $43,082, respectively, were converted into a total of 2,430,822 common shares and 2,430,822 share purchase warrants of the Company. Carrying value of $205,751 of convertible debentures was allocated to common shares. The residual method was used to allocate the proceeds between the common shares and the warrants which resulted in a value of $63,384 allocated to the warrants.

In March 2026, principal and accrued interest of $200,000 and $15,104, respectively, were converted into a total of 2,151,042 common shares and 2,151,042 share purchase warrants of the Company. Carrying value of $199,125 of convertible debentures was allocated to common shares. The residual method was used to allocate the proceeds between the common shares and the warrants which resulted in a value of $110,519 allocated to the warrants (Note 9(c)).

In April 2026, maturity date for the remaining $35,000 in principal amount of convertible debentures was extended to March 27, 2027. During the three months ended April 30, 2026, the Company recorded a loss on modification of debts of $3,605 in its condensed consolidated interim statements of loss and comprehensive loss (three months ended April 30, 2026 - $nil).

(d)

On April 2, 2024, the Company issued unsecured convertible debentures for $368,000. The debentures bear interest at 10% per annum, have maturity date of April 1, 2026 and are convertible into units, with each unit consisting of one common share and one share purchase warrant, at a conversion price equal to $0.10 per unit. Each share purchase warrant received on conversion will have an exercise price of $0.10 per warrant and will expire on October 1, 2026. The effective interest rate has been determined to be 13.6% per annum.

In May 2025, principal and accrued interest of $368,000 and $41,090, respectively, were converted into a total of 4,090,904 common shares and 4,090,904 share purchase warrants of the Company. Carrying value of $358,863 of convertible debentures was allocated to common shares. The residual method was used to allocate the proceeds between the common shares and the warrants which resulted in a value of $97,935 allocated to the warrants.

(e)

On April 30, 2024, the Company issued unsecured convertible debentures for $30,000. The debentures bear interest at 10% per annum, have maturity date of April 29, 2026 and are convertible into units, with each unit consisting of one common share and one share purchase warrant, at a conversion price equal to $0.10 per unit. Each share purchase warrant received on conversion will have an exercise price of $0.10 per warrant and will expire on October 29, 2026. The effective interest rate has been determined to be 13.5% per annum.

Transaction costs totaling $4,545 consisted of the following: 36,000 brokers’ warrants with fair value of $2,145 and brokers’ fee of $2,400. Brokers’ warrants entitle the holder to purchase one common share at an exercise price of $0.10 and expire on April 29, 2026. The fair values of brokers’ warrants were determined using the fair values of the common shares issued as values of services provided could not be estimated reliably. The Company used the Black-Scholes option pricing model to value the brokers’ warrants.

Balance, January 31, 2025

Loan extinguishment

Interest payment

Principal payment

Accretion and interest

Balance, January 31, 2026

Interest payment

Principal payment

Accretion and interest

Balance, April 30, 2026

Current, April 30, 2026

Non-current, April 30, 2026

Balance, April 30, 2026

Balance, January 31, 2025

Proceeds from issuances of promissory notes (Notes 7(a) and 7(b))

Interest

Balance, January 31, 2026

Interest

Balance, April 30, 2026

(a)

On June 5, 2025, the Company issued unsecured promissory notes for $275,000. The promissory notes bear interest at 6% per annum and have an original maturity date of May 31, 2026 (extended to December 31, 2026 (Note 19(a)).

(b)

On October 31, 2025, the Company issued an unsecured promissory note of $136,000. The promissory note bear interest at 6% per annum and have an original maturity date of May 31, 2026 (extended to December 31, 2026 (Note 19(a)).

(a)

The Company issued 600,000 common shares valued at $36,000 to a third party for services provided.

(b)

On April 15, 2026, the Company closed on a non-brokered private placement and issued 7,137,143 units at price of $0.07 per unit for gross proceeds of $499,600 (Note 13). Each unit consisted of one common share and one share purchase warrant entitling the holder to purchase one common share at an exercise price of $0.10 or US$0.075 and expiring on April 15, 2028. The residual method was used to allocate the proceeds between the common shares and the warrants which resulted in a value of $nil allocated to 700,000 liability-classified warrants (Note 9(a)) and $64,371 allocated to 6,437,143 equity-classified warrants (Note 9(c)).

(c)

The Company issued units pursuant to conversion of convertible debentures at conversion price of $0.10 as follows (Notes 5(c) and 5(e)):

Issuance Date of

Convertible Debentures

March 28, 2024

April 30, 2024

(d)

On April 30, 2025, the Company issued 14,999,303 common shares with a fair value of $1,349,937 pursuant to the settlement of accounts payable and amounts due to related parties totaling $1,499,930 (Note 13). A gain on settlement of debts of $149,993 was recorded within gains from extinguishment/forgiveness of debts on the condensed consolidated interim statements of loss and comprehensive loss.

(e)

The Company issued 250,000 common shares pursuant to the exercise of 250,000 share purchase warrants for proceeds of $25,000. $2,348 previously recorded as fair value of share purchase warrants were reclassified to common shares during the three months ended April 30, 2025.

(f)

The Company issued units pursuant to conversion of convertible debentures at conversion price of $0.10 as follows (Notes 5(c)):

Issuance Date of

Convertible Debentures

March 28, 2024

(a)

Warrant liabilities

At April 30, 2026, the Company has 4,271,429 share purchase warrants with exercise prices denominated in U.S. dollars (January 31, 2026 – 3,571,429). When non-compensatory warrants have an exercise price denominated in a currency which is different from the functional currency of the Company (Canadian dollar), the warrants are treated as financial liabilities. These warrants are therefore classified as financial liabilities with changes in fair value recognized in the condensed consolidated interim statements of loss and comprehensive loss. The warrant liabilities are measured using Level 3 inputs within the fair value hierarchy.

The following table summarizes the continuity of liability-classified warrants:

Balance, January 31, 2025

Change in fair value

Balance, January 31, 2026

Granted (Note 8(b))

Change in fair value

Balance, April 30, 2026

Number of Warrants

3,571,429

March 14, 2028

700,000

April 15, 2028

4,271,429

Risk free interest rates

Volatilities

120% to 122

 %

Market prices of common shares

US$0.048 to US$0.062

US$0.038

Expected dividends

Nil

 %

Nil

% 

Expected lives

1.87 to 1.95 years

2.12 years

Exercise prices

US$0.075 to US$0.11

US$0.11

Fair values of warrants

US$0.02 to US$0.04

US$0.02

(b)

Warrant liabilities of MedMelior

When non-compensatory warrants have an exercise price denominated in a currency which is different from the functional currency of MedMelior (Canadian dollar), the warrants are treated as financial liabilities. These warrants were therefore classified as financial liabilities with changes in fair value recognized in the condensed consolidated interim statements of loss and comprehensive loss. The warrant liabilities were measured using Level 3 inputs within the fair value hierarchy.

The following table summarizes the continuity of liability-classified warrants of MedMelior:

Balance, January 31, 2025

Expired

Change in fair value

Balance, April 30 and January 31, 2026

(c)

Equity-classified warrants

The following table summarizes the continuity of equity-classified share purchase warrants:

Balance, January 31, 2025

Granted (Notes 5(a), 5(c), 5(d) and 8(f))

Expired

Exercised

Balance, January 31, 2026

Granted (Notes 5(c), 5(e), 8(b) and 8(c))

Expired

Balance, April 30, 2026

Number of Warrants

5,300,000

June 13, 2026

1,750,000

July 1, 2026¹

2,950,000

August 30, 2026

350,000

August 31, 2026¹

7,743,342

September 27, 2026¹

4,090,904

October 1, 2026¹

416,712

October 29, 2026¹

15,000,000

March 14, 2028

6,437,143

April 15, 2028

2,200,000

July 9, 2028

46,238,101

1.

Maturity dates were extended for a further one-year period from original expiry dates in June 2026.

(a)

Performance Stock Units

The following table summarizes the continuity of the Company’s PSUs:

Outstanding, January 31, 2025

Forfeited

Outstanding, April 30 and January 31, 2026

Number of PSUs

25,000

Vested on March 31, 2021

5,200,000

Volume weighted average common share price for five consecutive dates:

$0.30 – 33.33%; $0.50 – 33.33%; $1.00 – 33.34%

5,225,000

Date of grant or valuation

Risk free interest rate

Volatilities

Fair value of common shares on grant date

Expected dividends

Nil

%

Nil

%

Expected life

1.63 years

1.87 years

Fair value of PSUs on grant date

(b)

Share Purchase Options

The following table summarizes the continuity of the Company’s share purchase options:

Outstanding, January 31, 2025

Granted

Forfeited/expired (Note 13)

Outstanding, January 31, 2026

Granted (Note 13)

Forfeited/expired (Note 13)

Outstanding, April 30, 2026

Options Outstanding

5,595,000

May 1, 2026

25% every six months

200,000

June 19, 2026

25% every six months

250,000

July 31, 2026

40% on grant date; 20% every two months thereafter

2,050,000

October 7, 2027

100% on grant date

700,000

July 1, 2030

25% every six months

6,050,000

February 18, 2031

25% every six months

14,845,000

Dates of grant or valuation

Risk free interest rates

2.45% and 2.47

%

Volatilities

110% and 107

%

Market prices of common shares on grant or valuation dates

$0.08 and $0.09

Expected dividends

Nil

%

Nil

%

Expected lives

5 years

2 and 1.94 years

Exercise prices

Fair values of options on grant or valuation dates

(c)

Share Purchase Options of MedMelior

The following table summarizes the continuity of MedMelior’s share purchase options:

Outstanding, January 31, 2025

Expired

Outstanding, April 30 and January 31, 2026

Supplemental disclosures:

Interest paid

Non-cash investing and financing activities:

Common shares issued for settlement of debts (Notes 8(d) and 13)

Common shares and share purchase warrants issued for conversion of convertible debentures (Notes 8(c) and 8(f))

·

·

·

·

The Company recorded $6,013 in interest expense on promissory owed to directors and the Chief Executive Officer (Note 7).

·

The Company issued 10,308,039 common shares pursuant to the settlement of amounts due to directors and officers totaling $1,030,804 (Note 8(c)).

(a)

In March 2021, Olymbec Development Inc. (“Olymbec”) filed a judicial demand before the Superior Court (Civil Division) of Quebec and a judgement for a safeguard order was obtained by Olymbec against Pivot Pharmaceuticals Manufacturing Corp. (“Pivot”), a former subsidiary, and the Company, as guarantor of the lease at 285-295 Kesmark Street, Quebec (the “Lease”), ordering Pivot and the Company to jointly pay the full amount of the Lease on the first day of each month. In May 2021, a judgement for a safeguard order was issued ordering Pivot and the Company to provide post-dated cheques for monthly lease payments for the months of June through November 2021. In June 2021, a judgement granted Pivot and the Company until June 30, 2021 to pay the outstanding lease totaling $124,223 and to deliver post-dated cheques each in the amount of $49,410.51 for monthly lease payments for the months of July through November 2021, which were completed. On October 25, 2023, due to non-payment of rent by Pivot, Olymbec terminated the Lease. An order for Pivot’s bankruptcy was granted on December 11, 2023 by the Superior Court (Commercial Division) of Quebec. On December 16, 2024, the Superior Court (Civil Division) of Quebec issued a judgment ordering the Company to pay Olymbec $367,428, representing lease unpaid by Pivot and administrative charges, plus $15,000 as punitive damages (Note 14(b)). On March 17, 2025, this judgment was registered with the Supreme Court of British Columbia.

(b)

The Company is a guarantor on the Lease (Note 14(a)), which was assigned together with the sale of Pivot in October 2020 pursuant to which the Company has recorded a financial guarantee liability of $419,341 (January 31, 2026 - $412,854).

The following table summarizes the continuity of financial guarantee liability: