Anacortes Mining Corp. — Interim / Quarterly Report 2021

Aug 31, 2021

First Light Capital Corp.

Condensed Consolidated Interim Financial Statements

For the Six-Month Period Ended June 30, 2021

First Light Capital Corp. Condensed Consolidated Interim Statements of Financial Position As at June 30, 2021 and December 31, 2020

(Expressed in Canadian dollars)

			June 30,	December 31,
			2021	2020
		Note	(Unaudited)	(Audited)
			$	$
ASSETS
Current assets
	Cash		1,910,250	2,214,452
	Total assets		1,910,250	2,214,452
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities			43,032	7,209
	Total liabilities		43,032	7,209
EQUITY
	Share capital	4	2,503,307	2,482,082
	Reserves		36,496	43,571
	Deficit		(672,585)	(318,410)
Total equity			1,867,218	2,207,243
Total liabilities and equity			1,910,250	2,214,452

Nature and continuance of operations (Note 1) Subsequent event (Note 6)

Approved and authorized for issue on behalf of the Board on August 30, 2021:

“Neil Alexander Currie” “James Currie” Neil Alexander Currie, Director James Currie, CEO and Director

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

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First Light Capital Corp. Condensed Consolidated Interim Statements of Comprehensive Loss For the Six-Month Periods Ended June 30, 2021 and 2020 (Expressed in Canadian dollars) (Unaudited)

	Three-Month	Three-Month	Six-Month	Six-Month
	Period Ended	PeriodEnded	Period Ended	Period Ended
	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
	$	$	$	$
EXPENSES
Due diligence costs	31,845	-	215,775	-
Foreign exchange loss	790	-	3,495	-
Office expenses	104	60	1,716	60
Professional fees	87,206	25,055	124,104	54,155
Transfer agent and filing fees	2,008	4,431	9,085	14,170
NET LOSS AND COMPREHENSIVE LOSS	121,953	29,546	354,175	68,385
LOSS PER SHARE – Basic and diluted	$ (0.01)	$ (0.00)	$ (0.02)	$ (0.01)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING	19,478,571	12,500,000	19,434,475	12,500,000

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

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First Light Capital Corp. Condensed Consolidated Interim Statements of Changes in Equity For the Six-Month Periods Ended June 30, 2021 and 2020

(Expressed in Canadian dollars) (Unaudited)

	Common Shares Number of Shares Amount Reserves Deficit Total
	$ $ $ $
Balance, December 31, 2019 Net loss for the period	12,500,000 703,151 45,871 (155,991) 593,031 - - - (68,385) (68,385)
Balance,June 30,2020	12,500,000 703,151 45,871 (224,376) 524,646
Balance, December 31, 2020 Common shares issued for warrant exercise Net loss for theperiod	30,546,000 2,482,082 43,571 (318,410) 2,207,243 141,500 21,225 (7,075) - 14,150 - - - (354,175) (354,175)
Balance,June 30,2021	30,687,500 2,503,307 36,496 (672,585) 1,867,218

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

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First Light Capital Corp. Condensed Consolidated Interim Statements of Cash Flows For the Six-Month Periods Ended June 30, 2021 and June 30, 2020

(Expressed in Canadian dollars) (Unaudited)

				Six-Month
			Six-Month	Period Ended
			Period Ended	June 30,
			June 30, 2021	2020
			$	$
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net loss for the period			(354,175)	(68,385)
Changes in non-cash working capital balances:
Accounts payable and accrued liabilities			35,823	11,702
Net cash used in operating activities			(318,352)	(56,683)
FINANCING ACTIVITIES
Common shares issued for cash			14,150	-
Net cash provided by financing activities			14,150	-
			(304,202)
CHANGE IN CASH				(56,683)
CASH, BEGINNING OF PERIOD			2,214,452	612,255
CASH,END OF PERIOD			1,910,250	555,572
			$ - $-
SUPPLEMENTAL CASH DISCLOSURES
Interest paid				$ -
Income taxespaid				$-

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

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First Light Capital Corp. Notes to the Condensed Consolidated Interim Financial Statements For the Six-Month Periods Ended June 30, 2021 and 2020 (Expressed in Canadian dollars) (Unaudited)

1. NATURE AND CONTINUANCE OF OPERATIONS

First Light Capital Corp. (the “Company”) was incorporated under the Business Corporations Act of British Columbia on March 15, 2018. The Company’s registered and records office is located at 800 – 885 West Georgia Street, Vancouver, British Columbia, V6C 3H1 and its head office address is located at 1090 – 510 Burrard Street, Vancouver, British Columbia, V6C 3B9.

On June 16, 2021, 13106212 B.C. Ltd., a wholly-owned subsidiary of the Company, was incorporated under the laws of British Columbia.

The principal business of the Company is the identification and evaluation of assets or businesses with a view to completing a Qualifying Transaction (“QT”). Identification and evaluation costs are recorded as property investigation costs in the condensed interim statement of comprehensive loss.

These condensed consolidated interim financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts from those reflected in these condensed consolidated interim financial statements.

On March 11, 2020, the outbreak of the novel coronavirus identified as “COVID-19” was declared a pandemic by the World Health Organization. The outbreak has resulted in governments worldwide enacting emergency measures to combat the spread of the virus which in turn have caused material disruption to business globally resulting in an economic slowdown. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

The Company has entered into a definitive arrangement agreement to complete a Qualifying Transaction. The Company and New Oroperu Resources Inc. (“New Oroperu” or “NOP”) entered into a definitive arrangement agreement dated June 16, 2021 (the “Arrangement Agreement”) to combine and create Anacortes Mining Corp. (“Anacortes”) – a new growth-oriented gold company (the “Transaction”) which intends to focus on continued exploration and advancement of New Oroperu’s Tres Cruces project located in Peru, in addition to seeking further growth opportunities in the Americas.

Under the terms of the Arrangement Agreement, which was negotiated at arms-length, each New Oroperu shareholder will receive 5.815 common shares of First Light (each a “First Light Share”) for each New Oroperu common share held (each a “New Oroperu Share”) (the “Share Exchange Ratio”). A portion of the New Oroperu options outstanding will vest immediately prior to closing of the Transaction and shall be transferred to New Oroperu for cancellation at closing of the Transaction (“Closing”) for an amount equal to the positive difference between the exercise price and the 20-day volume weighted average share price of New Oroperu for the 20-day period ending on the day prior to the announcement of the Transaction. All remaining outstanding options of New Oroperu will be exchanged for equivalent options of First Light in accordance with the Arrangement Agreement and based on the Share Exchange Ratio. The outstanding New Oroperu warrants will be adjusted to become exercisable for First Light Shares based on the Share Exchange Ratio. Based upon the Share Exchange Ratio, a total of 162,168,499 First Light Shares will be issued to New Oroperu shareholders based on a total of 27,887,962 New Oroperu Shares, before giving effect to a 6:1 proposed consolidation.

The Transaction will constitute a change of control of New Oroperu, and at closing New Oroperu will be required to pay an aggregate of approximately $2.4M in cash change of control payments to five insiders.

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First Light Capital Corp. Notes to the Condensed Consolidated Interim Financial Statements For the Six-Month Periods Ended June 30, 2021 and 2020 (Expressed in Canadian dollars) (Unaudited)

1. NATURE AND CONTINUANCE OF OPERATIONS (continued)

Pursuant to the terms of the Arrangement Agreement, a portion of the New Oroperu options outstanding will vest immediately prior to closing of the Transaction and shall be transferred to New Oroperu for cancellation at closing of the Transaction for an amount equal to the positive difference between the exercise price and the 20-day volume weighted average share price of New Oroperu for the 20-day period ending on the day prior to the announcement of the Transaction. All remaining outstanding options of New Oroperu will be exchanged for equivalent options of First Light in accordance with the Arrangement Agreement and based on the Share Exchange Ratio. A total of $2,073,600 will be paid to certain New Oroperu option holders pursuant to the above.

The Transaction has not closed as of August 30, 2021.

2. BASIS OF PRESENTATION

a) Statement of Compliance

These condensed consolidated interim financial statements, have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, being IAS 34, Interim Financial Reporting. As a result, certain disclosures included in the annual financial statements prepared in accordance with IFRS have been condensed or omitted. Accordingly, these condensed consolidated interim financial statements should be read in conjunction with the Company’s audited annual financial statements for the year ended December 31, 2020. In preparation of these condensed interim financial statements, the Company has consistently applied the same accounting policies as disclosed in Note 2 to the audited annual financial statements for the year ended December 31, 2020.

These condensed consolidated interim financial statements were approved by the Board of Directors on August 30, 2021.

b) Use of Estimates and Judgments

The preparation of these interim financial statements in conformity with IFRS requires the Company’s management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates. 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 and in any future periods affected.

Significant areas requiring the use of estimates include unrecognized deferred income tax assets. Actual results could differ from those estimates.

Judgments made by management include the factors used to determine the assessment of whether the going concern assumption is appropriate. The assessment of the going concern assumption requires management to take into account all available information about the future, which is at least, but is not limited to, 12 months from the end of the reporting period.

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First Light Capital Corp. Notes to the Condensed Consolidated Interim Financial Statements For the Six-Month Periods Ended June 30, 2021 and 2020 (Expressed in Canadian dollars) (Unaudited)

3. RELATED PARTY TRANSACTIONS

The Company considers the directors and officers of the Company as key management personnel. Key management compensation was $Nil for the six-month periods ended June 30, 2021 (2020-$Nil).

4. SHARE CAPITAL

a) Authorized

Unlimited number of common shares without par value.

b) Issued

• During the six month period ended June 30, 2021:

On April 14, 2021, the Company issued 62,500 common shares for the exercise of warrants priced at $0.10 per common share for gross proceeds of $6,250.

On February 8, 2021, the Company issued 79,000 common shares for the exercise of warrants priced at $0.10 per common share for gross proceeds of $7,900.

c) Escrow

As at June 30, 2021, 11,200,000 common shares were held in escrow and are expected to be released upon the completion of the Qualifying Transaction.

• d) Stock options

On April 23, 2019, the Company granted an aggregate of 300,000 incentive stock options to its directors, officers and certain technical consultants, as outlined in the Prospectus of March 20, 2019. Each option is exercisable at a price of $0.10 per share for a period of five years and vested on the grant date. A continuity of options outstanding during the six-month periods ended June 30, 2021 is as follows:

	Number of	Weighted	Expiry date
	shares under	Average
	option	Exercise Price
Outstanding at December 31, 2020	300,000	$0.10	April 23, 2024
Granted	-	-
Exercised	-	-
Cancelled	-	-
Expired	-	-
Outstanding and exercisable at
June 30,2021	300,000	$0.10	April 23,2024

As at June 30, 2021, the stock options outstanding have a weighted average outstanding contractual life of 2.82 years.

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First Light Capital Corp. Notes to the Condensed Consolidated Interim Financial Statements For the Six-Month Periods Ended June 30, 2021 and 2020 (Expressed in Canadian dollars) (Unaudited)

4. SHARE CAPITAL (continued)

The Company has adopted a stock option plan which provides that the board of directors of the Company may from time to time, in its discretion, and in accordance with Exchange requirements, grant to directors, officers and technical consultants to the Company, nontransferable options to purchase Common Shares, provided that the number of Common Shares reserved for issuance, together with any options issued to eligible charitable organizations, will not exceed 10% of the issued and outstanding Common Shares, exercisable for a period of up to ten years from the date of grant and until completion of the Qualifying Transaction, will not exceed 1,250,000 options (in the event of completion of the Minimum Offering) or 1,300,000 options (in the event of the completion of the Maximum Offering). Until the completion of the Qualifying Transaction, the number of Common Shares reserved for issuance to any individual director or officer will not exceed 5% of the issued and outstanding Common Shares and the number of Common Shares reserved for issuance to all technical consultants will not exceed 2% of the issued and outstanding Common Shares, each as at the closing of the Offering. No options may be granted to investor relations service providers and the exercise price cannot be less than the greater of the Offering share price and the Discounted Market Price. Options may be exercised the greater of 12 months after the Completion of the Qualifying Transaction and 90 days following cessation of the optionee’s position with the Company, provided that if the cessation of office, directorship, or technical consulting arrangement was by reason of death, the option may be exercised within a maximum period of one year after such death, subject to the expiry date of such option. Any Common Shares acquired pursuant to the exercise of options prior to the Completion of the Qualifying Transaction will be subject to escrow restrictions until the issuance of the Final Exchange Bulletin.

e) Warrants

A continuity of the warrants outstanding during the six-month period ended June 30, 2021 is as follows:

	Number of shares	Weighted	Weighted
	issuable under	Average	Average Exercise
	Warrants	Remaining	Price
		Contractual life
		in Years
Outstanding at December 31, 2020	204,000	0.31	$0.10
Granted	-		-
Exercised	(141,500)		0.10
Cancelled	-		-
Expired	(62,500)		0.10
Outstanding and exercisable at June 30,
2021	-	-	-

5. FAIR VALUE MEASUREMENTS

International Financial Reporting Standards 7, Financial Instruments: Disclosures , establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as 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).

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First Light Capital Corp. Notes to the Condensed Consolidated Interim Financial Statements For the Six-Month Periods Ended June 30, 2021 and 2020 (Expressed in Canadian dollars) (Unaudited)

5. FAIR VALUE MEASUREMENTS (continued)

The Company’s financial instruments include cash and accounts payable. The Company’s cash is measured at fair value and is classified as Level 1 under the fair value hierarchy. The carrying value of accounts payable approximates their fair value due to the on demand nature or short-term maturity of these instruments.

Assets measured at fair value on a recurring basis were presented on the Company’s statement of financial position as at June 30, 2021 are as follows:

	Fair Value Measurements Using	Fair Value Measurements Using
	Quoted Prices in	Significant
	Active Markets	Other	Significant
	For Identical	Observable	Unobservable
	Instruments	Inputs	Inputs	Balance June
	(Level 1)	(Level 2)	(Level 3)	30,2021
	$	$	$	$
Cash	1,910,250	-	-	1,910,250

6. SUBSEQUENT EVENT

On July 21, 2021, First Light and NOP completed a private placement financing whereby First Light issued 55,096,250 subscription receipts (the “Subscription Receipts”) at a price of $0.40 per Subscription Receipt (the “Subscription Price”) for gross proceeds of $22,038,500 (the “Private Placement” or “PP”) and net proceeds of $20,483,330. The PP included the partial exercise of the agents’ option and was co-led by Haywood Securities Inc. (“Haywood”) as sole underwriter, and Clarus Securities Inc. (together with Haywood, the “Agents”) under the brokered portion of the PP.

The Private Placement consisted of Subscription Receipts offered by First Light and by 1310612 B.C. Ltd. (“Finco”), a wholly-owned subsidiary of First Light, as follows:

• (i) 4,406,250 Subscription receipts sold by First Light on a brokered basis;

• (ii) 49,077,500 Subscription receipts sold by Finco on a brokered basis;

• (iii) 125,000 Subscription receipts sold by First Light on a non-brokered basis; and

• (iv) 1,487,500 Subscription receipts sold by Finco on a non-brokered basis.

Each Subscription Receipt sold by First Light will entitle the holder thereof to receive one First Light common share (each, a “First Light Share”) and one-half of one common share purchase warrant of First Light (each full warrant, a “First Light Warrant”). Each Subscription Receipt sold by Finco will entitle the holder to receive one Finco common share (each a “Finco Share”) and one-half of one Finco common share purchase warrant (each whole warrant a “Finco Warrant”). After conversion of the Finco Subscription Receipts and in connection with closing of the Transaction, Finco will amalgamate with a wholly-owned subsidiary of First Light which will result in the Finco Shares and the Finco Warrants being exchanged for First Light Shares and First Light Warrants on a “one for one” basis. Each First Light Warrant shall be exercisable for one First Light Share at an exercise price of $0.55 for a period of 24 months from the closing date of the Private Placement. If certain escrow release conditions are not satisfied on or before the November 30, 2021 (subject to extension at the request of the Company or the Agents), or if the Arrangement Agreement is terminated at any earlier time, or if First Light advises the Agents or announces to the public that it does not intend to satisfy the escrow release conditions, then holders of the Subscription Receipts will be returned an amount equal to the aggregate Subscription Price for the Subscription Receipts held by them, together with a pro rata portion of interest earned on the escrowed proceeds (less applicable withholding tax, if any) and the Subscription Receipts will be cancelled and of no further force or effect.

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