Austin Resources Ltd. — Annual Report 2019

Apr 28, 2020

AUSTIN RESOURCES LTD. CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2019 AND 2018 (EXPRESSED IN CANADIAN DOLLARS)

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Independent Auditor’s Report

To the Shareholders of Austin Resources Ltd.

Opinion

We have audited the consolidated financial statements of Austin Resources Ltd. and its subsidiary (the “Company”), which comprise the consolidated statements of financial position as at December 31, 2019 and 2018, and the consolidated statements of loss and comprehensive loss, consolidated statements of cash flows, and consolidated statements of changes in equity (deficiency) for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

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. 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 net loss and working capital deficiency as of December 31, 2019. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that material uncertainties exist that cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

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

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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, 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 IFRS, 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 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.

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 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 judgement 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 risks 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

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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.

The engagement partner of the audit resulting in this independent auditor’s report is Koko Yamamoto.

McGovern Hurley LLP

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Chartered Professional Accountants Licensed Public Accountants

Toronto, Ontario April 24, 2020

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Austin Resources Ltd. Consolidated Statements of Financial Position (Expressed in Canadian Dollars)

		As at		As at
	December 31,			December 31,
		2019		2018
ASSETS
Current assets
Cash and cash equivalents	$	82,614	$	103,492
Amounts receivable		2,070		3,390
Prepaid expenses		1,560		1,766
Total current assets		86,244		108,648
Non-current assets
Equipment(note 8)		71		197
Total assets	$	86,315	$	108,845
EQUITY (DEFICIENCY) AND LIABILITIES
Current liabilities
Accounts payable and accrued liabilities (note 13)	$	27,472	$	31,250
Relatedpartyloan(notes 9 and 13)		102,411		632,740
Total liabilities		129,883		663,990
Deficiency
Issued capital (note 10)		6,144,075		5,448,187
Deficit		(6,187,643)		(6,003,332)
Total deficiency		(43,568)		(555,145)
Total deficiency and liabilities	$	86,315	$	108,845

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

Nature of operations and going concern (note 1) Commitments and contingencies (notes 7 and 17) Subsequent events (note 18)

Approved on behalf of the Board:

"Weimin Fu", Director

"Jiangping Mo", Director

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Austin Resources Ltd. Consolidated Statements of Loss and Comprehensive Loss (Expressed in Canadian Dollars)

		Year ended	Year ended	Year ended
	December 31,		December 31,
		2019		2018
Operating expenses
Exploration and evaluation expenditures (note 7)	$	25,427	$	45,571
Consulting and management fees (note 13(a))		23,830		23,365
Professional fees (note 13(b))		65,839		73,424
Office expense		591		7,107
Interest expense (note 9)		33,096		50,000
Shareholder communication and filing fees		19,808		8,258
Bank charges		3,828		4,242
Depreciation expense		126		126
Loss for the year before other items		(172,545)		(212,093)
Foreign exchange(loss) gain		(11,766)		10,012
Net loss and comprehensive
loss for theyear	$	(184,311)	$	(202,081)
Basic and diluted net loss
per share (note 14)	$	(0.01)	$	(0.02)
Weighted average number of common shares outstanding - basic and diluted		13,846,618		8,846,618

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

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Austin Resources Ltd. Consolidated Statements of Cash Flows (Expressed in Canadian Dollars)

		Year ended	Year ended	Year ended
	December 31,		December 31,
		2019		2018
Operating activities
Net loss for the year	$	(184,311)	$	(202,081)
Adjustments for:
Depreciation expense		126		126
Accrued interest expense		33,096		50,000
Changes in non-cash working capital items:
Amounts receivable		1,320		(1,422)
Prepaid expenses and advances		206		70
Accountspayable and accrued liabilities		(3,779)		(4,547)
Net cash used in operating activities		(153,342)		(157,854)
Financing activities
Proceeds from private placement offering		750,000		-
Cost of issue		(54,112)		-
Repayment of related party loan		(663,424)		-
Proceeds received from relatedpartyloan		100,000		-
Net cashprovided by financing activities		132,464		-
Net change in cash and cash equivalents		(20,878)		(157,854)
Cash and cash equivalents, beginning ofyear		103,492		261,346
Cash and cash equivalents, end ofyear	$	82,614	$	103,492

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

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Austin Resources Ltd.

Consolidated Statements of Changes in Equity (Deficiency) (Expressed in Canadian Dollars)

	Number of		Issued
	shares		capital	Deficit	Total
Balance, December 31, 2017	8,846,618	$	5,448,187	$ (5,801,251) $	(353,064)
Net loss and comprehensive loss for theyear	-		-	(202,081)	(202,081)
Balance, December 31, 2018	8,846,618	$	5,448,187	$ (6,003,332) $	(555,145)
Proceeds from private placement offering, net	12,500,000		695,888	-	695,888
Net loss and comprehensive loss for theyear	-		-	(184,311)	(184,311)
Balance, December 31, 2019	21,346,618	$	6,144,075	$ (6,187,643) $	(43,568)

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

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Austin Resources Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

1. Nature of operations and going concern

Austin Resources Ltd. (individually, or collectively with its subsidiary, as applicable, “Austin Resources”, or the “Company”) recently completed the sale of all of its properties in Chile, and as a result of the transaction, the Company did not maintain the requirements for a TSX Venture Tier 2 company and its listing was transferred to the NEX board of the TSX Venture Exchange. While the Company currently holds no mineral properties, it retains its classification as a ‘Mineral Exploration/Development’ company.

The Company’s head office and principal address in Canada is The Canadian Venture Building, 82 Richmond St East, Suite 204, Toronto, Ontario, M5C 1P1. The Company’s common shares were listed on the TSX Venture Exchange (“TSX-V”, or the “Exchange”) under the symbol “AUT”. The Company had been advised by the Exchange that, with the closing of the transfer of all of its interests in the mineral exploration properties in Chile, the Company ceased to have active operations, no longer met the continued listing requirements of the Exchange and was transferred to the NEX. As a result of such transfer to the NEX, the Company’s trading symbol changed from AUT to AUT.H subsequent to December 31, 2019 (note 18).

The Company was in the process of exploring its mineral properties and had not yet determined whether those properties contained mineral reserves that were economically recoverable. Subsequent to December 31, 2019, the Company transferred all of its interest in the mineral exploration properties in Chile held by Minera Azul Ventures Limitada ("Minera Azul"), the Company's wholly owned Chilean subsidiary (note 18).

These consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from the carrying values as shown. As at December 31, 2019, the Company had not yet achieved profitable operations, had accumulated losses of $6,187,643 (December 31, 2018 - accumulated losses of $6,003,332) since inception, had working capital deficiency of $43,639 (December 31, 2018 - working capital deficiency of $555,342) and expects to incur further losses in the development of its business, all of which constitutes a material uncertainty which casts significant doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. There is no assurance that these funds will be available on terms acceptable to the Company or at all. These consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. Such adjustments could be material.

On July 2, 2019, the Company received approval of its shareholders and the approval of the TSX Venture Exchange for its previously announced share consolidation ("Share Consolidation"). As a result, the common shares of the Company have been consolidated on a five for one (5:1) basis. The Share Consolidation has been retrospectively reflected in these consolidated financial statements and all references to the number of common shares herein have been revised to reflect the Share Consolidation.

2. Principles of consolidation

The consolidated financial statements comprise of the financial statements of Austin Resources Ltd. and its whollyowned Chilean subsidiary, Minera Azul.

Subsidiaries

Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect those returns through the power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date control is transferred to the Company, and are de-consolidated from the date control ceases. The financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiary after eliminating inter-entity balances and transactions.

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Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

Austin Resources Ltd.

3. Significant accounting policies

The Company applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).

The policies applied in these consolidated financial statements are based on IFRSs issued and outstanding as of April 24, 2020, the date the Board of Directors approved the statements.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and balances with banks and investment-grade deposit certificates with original maturities of three months or less. As at December 31, 2019 and December 31, 2018, the Company did not hold any cash equivalents.

Financial instruments

Recognition

The Company recognizes a financial asset or financial liability on the statement of financial position when it becomes party to the contractual provisions of the financial instrument. Financial assets are initially measured at fair value, and are derecognized either when the Company has transferred substantially all the risks and rewards of ownership of the financial asset, or when cash flows expire. Financial liabilities are initially measured at fair value and are derecognized when the obligation specified in the contract is discharged, cancelled or expired.

A write-off of a financial asset (or a portion thereof) constitutes a derecognition event. Write-off occurs when the Company has no reasonable expectations of recovering the contractual cash flows on a financial asset.

Classification and Measurement

The Company determines the classification of its financial instruments at initial recognition. Financial assets and financial liabilities are classified according to the following measurement categories:

• i) those to be measured subsequently at fair value, either through profit or loss (“FVTPL”) or through other comprehensive income (“FVTOCI”); and

• ii) those to be measured subsequently at amortized cost.

The classification and measurement of financial assets after initial recognition at fair value depends on the business model for managing the financial asset and the contractual terms of the cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost at each subsequent reporting period. All other financial assets are measured at their fair values at each subsequent reporting period, with any changes recorded through profit or loss or through other comprehensive income (which designation is made as an irrevocable election at the time of recognition).

After initial recognition at fair value, financial liabilities are classified and measured at either:

• i) amortized cost;

• ii) FVTPL, if the Company has made an irrevocable election at the time of recognition, or when required (for items such as instruments held for trading or derivatives); or,

• iii) FVTOCI, when the change in fair value is attributable to changes in the Company’s credit risk.

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Austin Resources Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

3. Significant accounting policies (continued)

Financial instruments (continued)

Classification and Measurement (continued)

The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.

Transaction costs that are directly attributable to the acquisition or issuance of a financial asset or financial liability classified as subsequently measured at amortized cost are included in the fair value of the instrument on initial recognition. Transaction costs for financial assets and financial liabilities classified at fair value through profit or loss are expensed in profit or loss.

The Company’s financial instruments consist of the following:

Financial assets:	Classification:
Cash and cash equivalents	Amortized cost
Amounts receivable	Amortized cost
Financial liabilities:	Classification:
Accounts payable and accrued liabilities	Amortized cost
Relatedpartyloan	Amortized cost

Impairment

The Company assesses all information available, including on a forward-looking basis the expected credit losses associated with any financial assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. To assess whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition based on all information available, and reasonable and supportive forward-looking information.

Fair value of financial instruments

The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

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Austin Resources Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

3. Significant accounting policies (continued)

Exploration and evaluation properties and expenditures

All acquisition and exploration costs, net of incidental revenues, are charged to profit or loss in the period incurred until such time as it has been determined that a property is commercially viable and technically feasible, in which case subsequent exploration costs and the costs incurred to develop a property are capitalized into “mines under construction”. On the commencement of commercial production, all assets included in “mines under construction” are transferred to “producing mines” and depletion of each mining property will be provided on a unit-of-production basis using estimated resources as the depletion base.

Development assets

When economically viable reserves have been determined and the decision to proceed with development has been approved, the expenditures related to development and construction are capitalized as construction-in-progress and classified as a component of property, plant and equipment. Costs associated with the commissioning of new assets incurred in the period before they are operating in the way intended by management, are capitalized. Development expenditure is netted against the proceeds of the sale of metals from ore extracted during the development phase. Interest on borrowings related to the construction and development of assets is capitalized until substantially all the activities required to make the asset ready for its intended use are complete.

Income taxes

Income tax included in profit or loss for the years presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is recorded by providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial position reporting date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

Foreign currencies

The presentation and functional currency of the Company and its subsidiary is the Canadian dollar.

Transactions in currencies other than the functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each financial position reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at the reporting date. Exchange differences are recognized in profit or loss in the period in which they arise.

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Austin Resources Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

3. Significant accounting policies (continued)

Share-based payments

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a graded vesting basis over the period during which the employee becomes unconditionally entitled to equity instruments, based on the Company’s estimate of equity instruments that will eventually vest. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share-based payments reserve.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

When share purchase options are exercised, the cash proceeds and their fair value previously recorded in equity reserves are recorded as issued capital. When share purchase options expire unexercised, their fair value as previously recorded, is recorded to deficit.

Share purchase warrants

The fair values of warrants issued by the Company are determined on their issuance date, using the Black-Scholes option pricing model, and are recorded as a component of equity reserves. When the warrants are granted as compensation for the receipt of goods or services, they are recorded either as an expense or as a cost, capitalized to issued capital or assets, on the same basis as equivalent cash payments.

When share purchase warrants are exercised, the cash proceeds and their fair value previously recorded in warrant reserves are recorded as issued capital. When share purchase warrants expire unexercised, their fair value as previously recorded, is recorded to deficit.

Loss per share

Loss per share is based on the weighted average number of common shares of the Company outstanding during the year. The diluted loss per share reflects the potential dilution of common share equivalents, such as outstanding stock options and warrants, in the weighted average number of common shares outstanding during the period, if dilutive. In the Company’s case, diluted loss per share is the same as basic loss per share as the effects of including all outstanding stock options and warrants would be anti-dilutive.

Changes in accounting policies

During the year ended December 31, 2019, the Company adopted a number of new IFRS standards, interpretations, amendments and improvements of existing standards. These included IFRS 16 - Leases and IFRIC 23 - Uncertainty Over Income Tax Treatment. These new standards and changes did not have any material impact on the Company’s consolidated financial statements.

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Austin Resources Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

3. Significant accounting policies (continued)

New standards not yet adopted and interpretations issued but not yet effective

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2020. Many are not applicable or do not have a significant impact to the Company and have been excluded. The following has not yet been adopted and are being evaluated to determine their impact on the Company.

IAS 1 – Presentation of Financial Statements (“IAS 1”) and IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”) were amended in October 2018 to refine the definition of materiality and clarify its characteristics. The revised definition focuses on the idea that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments are effective for annual reporting periods beginning on or after January 1, 2020.

4. Critical judgments and estimation uncertainties

The preparation of consolidated financial statements in conformity with IFRS requires the Company’s management to make judgments, estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes to the financial statements. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results may differ from those estimates.

Information about critical judgments and estimates in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements include, but are not limited to:

Income, value added, withholding and other taxes

The Company is subject to income, value added, withholding and other taxes. Significant judgment is required in determining the Company’s provisions for taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The determination of the Company’s income, value added, withholding and other tax liabilities requires interpretation of complex laws and regulations. The Company’s interpretation of taxation law as applied to transactions and activities may not coincide with the interpretation of the tax authorities. All tax related filings are subject to government audit and potential reassessment subsequent to the financial statement reporting period. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the tax related accruals and deferred income tax provisions in the period in which such determination is made.

Contingencies

Refer to note 17.

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Austin Resources Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

5. Capital risk management

The Company manages and adjusts its capital structure based on available funds in order to support the acquisition, exploration and development of its exploration and evaluation assets. The Board does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The capital of the Company consists of common shares, warrants and options of the Company.

The properties in which the Company currently has an interest are in the exploration and evaluation stage; as such, the Company is dependent on external financing to fund its activities. In order to carry out planned exploration and evaluation, and pay for administrative costs, the Company must raise additional amounts. The Company 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, given the relative size of the Company, is reasonable. There were no changes to the Company's approach to capital management during the years ended December 31, 2019 and 2018.

6. Financial instruments

		As at		As at
	December 31,			December 31,
		2019		2018
Financial assets at amortized cost
Cash and cash equivalents	$	82,614	$	103,492
Amounts receivable		2,070		3,390
Financial liabilities at amortized cost
Accounts payable and accrued liabilities	$	27,472	$	31,250
Relatedpartyloan		102,411		632,740

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Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

Austin Resources Ltd.

6. Financial instruments (continued)

Financial risk factors

The nature of the exploration process and the location of the Company’s assets exposed the Company to risks associated with fluctuations in commodity prices and foreign currency exchange rates. To date, the Company has not used derivative financial instruments to manage these risks.

Credit risk

Credit risk is the risk of loss associated with a counter-party’s inability to fulfil its payment obligations. The Company's credit risk is primarily attributable to cash. The Company has no significant concentration of credit risk arising from operations. Cash is held with reputable financial institutions, from which management believes the risk of loss to be minimal.

Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company’s liquidity and operating results may be adversely affected if the Company’s access to the capital market is hindered, whether as a result of a downturn in stock market conditions generally or related to matters specific to the Company. The Company expects to generate cash flow primarily from financing activities. As of December 31, 2019, the Company had net working capital deficiency of $43,639 (2018 - $555,342), which included cash balance of $82,614, amounts receivable of $2,070 and prepaid expenses and advances of $1,560, offset by accounts payable and accrued liabilities of $27,472 and related party loan of $102,411. The Company's financial liabilities generally have contractual maturities of less than 30 days and are subject to normal trade terms.

Market risk

Market risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will fluctuate significantly due to changes in market prices. The value of the financial instruments can be affected by changes in interest rates, prices and foreign exchange rates. Management believes the risk of loss related to market risk to be remote.

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Austin Resources Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

6. Financial instruments (continued)

Currency risk

Currency risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will fluctuate because of changes in foreign exchange rates. The Company’s property interests in Chile make it subject to foreign currency fluctuations and inflationary pressures which may adversely affect the Company’s financial position, profit or loss and cash flows. The Company is affected by changes in exchange rates between the Canadian Dollar and foreign currencies. As at December 31, 2019, a portion of the Company’s net assets were held in Chilean Pesos (CAD$5,065). A 10% strengthening (weakening) of the Canadian Dollar against the Chilean Peso would not have a significant effect based on foreign currency balances at December 31, 2019.

Commodity price risk

The Company is exposed to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact on the Company's earnings due to movements in individual equity prices or general movements in the level of the stock market. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company closely monitors commodity prices, as it relates to gold, copper and iron ore, individual equity movements and the stock market to determine the appropriate course of action to be taken by the Company. Commodity price risk is remote as the Company is not a producing entity.

Fair value hierarchy

Cash and cash equivalents and amounts receivable are measured at amortized cost. Accounts payable and accrued liabilities and related party loan are are measured at amortized cost.

IFRS 7 Financial Instruments: Disclosures requires classification of fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The levels of the fair value hierarchy are defined as follows:

Level 1:Quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2:Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and,

Level 3: Inputs for the asset or liability that are not based on observable market data

As at December 31, 2019 and December 31, 2018, none of the Company's financial instruments were held at fair value.

• 16 -

Austin Resources Ltd.

Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

7. Exploration and evaluation properties and expenditures

		Year ended	Year ended	Year ended
	December 31,		December 31,
		2019		2018
Exploration licences and lease payments	$	36,528	$	38,102
Value added taxes(1)		(11,101)		7,469
Total expenditures	$	25,427	$	45,571

(1) Value added taxes (“VAT”) arise from the Government of Chile and is in respect of the Company’s exploration and evaluation activities. The actual timing of receipt is uncertain as VAT is typically refundable only upon commercial operations; therefore, VAT has been classified as part of exploration and evaluation expenditures as VAT has arisen primarily on exploration and evaluation expenditures.

Chile

In 2011, the Company’s Chilean subsidiary, Minera Azul, entered into certain option agreements, as amended, to earn 100% interests in certain mineral exploration properties located adjacent to the Atacama fault near the town of La Higuera in Chile. During 2012 and 2013, the Company renegotiated the terms of two of the option properties whereby the Company was able to satisfy all the conditions under the revised option agreements and completed the Company’s earn-in on these properties. The two properties for which the Company completed its earn-in form the La Higuera Project. A summary of the two earn-in property interests is provided below.

Avril, Gloria, Withney, Caballo Cinco, Blanco Seis and Blanco

The Company earned a 100% interest in the Avril, Gloria, Withney, Caballo Cinco, Blanco Seis and Blanco exploitation concessions and claims.

Benja I and II

The Company earned a 100% interest in the Benja I and Benja II exploitation claims.

A Net Smelter Royalty ("NSR") of 1% must be paid starting from the beginning of commercial production on these exploitation claims, on a quarterly basis. The Company may acquire the NSR by paying a purchase price of either US$500,000 ($682,100) or its equivalent in the Company’s common shares, at the election of the former owner of the property. The Company has also granted the former owner of the Benja I and II mining concessions the right to reprocess the existing slag from historical mining activity on the concessions.

On February 27, 2020, the Company received approval of its shareholders and the TSX Venture Exchange for the transfer of all of its interest in the mineral exploration properties in Chile held by Minera Azul (note 18).

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Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

Austin Resources Ltd.

8. Equipment

			**Accumulated **	**Accumulated **	Net book
		Cost	depreciation		value
Balance, December 31, 2017	$	8,768	$	(8,445) $	323
Depreciation		-		(126)	(126)
Balance, December 31, 2018		8,768		(8,571)	197
Depreciation		-		(126)	(126)
Balance, December 31, 2019	$	8,768	$	(8,697) $	71

The Company’s equipment is located in Chile.

9. Related party loan

On May 26, 2016, the Company entered into a loan agreement with Guilin International Company Limited ("Guilin"), a major shareholder of the Company, in the amount of $500,000 at an interest rate of 10% per annum. During the year ended December 31, 2019, the Company repaid the related party loan in full in the amount of $663,424 including accrued interest of $163,424. As at December 31, 2019, the Company owes $nil (December 31, 2018 - $632,740) including accrued interest.

During the year ended December 31, 2019, the Company entered a loan agreement with a shareholder of the Company in the amount of $100,000 at an interest rate of 10% per annum. During the year ended December 31, 2019, the Company accrued interest expense of $2,411. As at December 31, 2019, the Company owes $102,411 (December 31, 2018, $nil) including accrued interest.

10. Share capital

a) Authorized share capital

The authorized share capital consisted of an unlimited number of common shares without par value.

b) Common shares issued

	Number of
	common
	shares	Amount
Balance, December 31, 2017 and 2018	8,846,618 $	5,448,187
Proceeds fromprivateplacement offering,net	12,500,000	695,888
Balance,December 31,2019	21,346,618 $	6,144,075

On August 7, 2019, the Company completed a private placement offering ("Private Placement") of $750,000 in gross proceeds based on the issuance of 12,500,000 common shares at a price of $0.06 per common share. The common shares issued in connection with the Private Placement were subject to a resale restriction for a period of four months plus one day from August 7, 2019. The Company incurred a total issuance cost of $54,112.

11. Warrants

The Company had no warrants outstanding as at December 31, 2019 and 2018.

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Austin Resources Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

12. Stock options

The Company has adopted a stock option plan (the “Plan"), to be administered by the Directors of the Company. Under the Plan, the Company may grant options to directors, officers, employees and consultants to purchase shares of the Company. The Plan provides for the issuance of stock options to acquire up to 10% of the Company's issued and outstanding capital. The plan is a rolling plan as the number of shares reserved for issuance pursuant to the grant of stock options will increase as the Company’s issued and outstanding share capital increases. Options granted under the Plan will be for a term not to exceed five years. The plan provides that it is solely within the discretion of the Board to determine who should receive stock options, in what amounts, and determine vesting terms. The exercise price for any stock option shall not be lower than the market price of the underlying common shares at the time of grant.

Each stock option converts into one common share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. The Company settles stock options exercised through the issuance of common shares from treasury.

The Company had no stock options outstanding as at December 31, 2019 and 2018.

13. Related party transactions

(a) Compensation of key management personnel of the Company

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consists of the Board of Directors, corporate officers, including the Chief Executive Officer and Chief Financial Officer, as well the Vice President of Exploration and the Country Manager.

		Year ended	Year ended
	December 31,		December 31,
		2019	2018
Salaries and benefits	$	23,830	$ 23,365

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Austin Resources Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

13. Related party transactions (continued)

(b) Transactions with related parties

The Chief Financial Officer is an employee of Marrelli Support Services Inc. ("MSSI"), a firm providing accounting services. During the year ended December 31, 2019, the Company incurred $26,511 (year ended December 31, 2018 - $25,674) for accounting services (included in professional fees) rendered by MSSI. As at December 31, 2019, MSSI was owed $1,792 (December 31, 2018 - $7,785) and this amount was included in accounts payable and accrued liabilities. The amount is unsecured, non-interest bearing and due on demand.

Refer to note 9.

14. Loss per share

For the year ended December 31, 2019, basic and diluted loss per share has been calculated based on the loss attributable to common shareholders of $184,311 (year ended December 31, 2018 - $202,081) and the weighted average number of common shares outstanding of 13,846,618, respectively (year ended December 31, 2018 - 8,846,618).

15. Segmented Information

The Company conducts its business as a single operating segment, being mineral exploration and evaluation in Chile and Canada. The following table summarizes the total assets and liabilities by geographic segment as at:

December 31, 2019		Chile		Canada		Total
Cash and cash equivalents	$	7,385	$	75,229	$	82,614
Other current assets		2,044		1,586		3,630
Equipment		71		-		71
Total assets	$	9,500	$	76,815	$	86,315
Accounts payable and accrued liabilities	$	4,435	$	23,037	$	27,472
Relatedpartyloan		-		102,411		102,411
Total liabilities	$	4,435	$	125,448	$	129,883
December 31, 2018		Chile		Canada		Total
Cash and cash equivalents	$	6,176	$	97,316	$	103,492
Other current assets		2,314		2,842		5,156
Equipment		197		-		197
Total assets	$	8,687	$	100,158	$	108,845
Accounts payable and accrued liabilities	$	4,855	$	26,395	$	31,250
Relatedpartyloan		-		632,740		632,740
Total liabilities	$	4,855	$	659,135	$	663,990

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Austin Resources Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

15. Segmented Information (continued)

The following table summarizes the loss by geographic segment:

Year ended December 31, 2019		Chile		Canada		Total
Exploration and evaluation expenditures	$	25,427	$	-	$	25,427
General and administrative expense		25,886		121,106		146,992
Foreign exchange loss		11,309		457		11,766
Depreciation expense		126		-		126
	$	62,748	$	121,563	$	184,311
Year ended December 31, 2018		Chile		Canada		Total
Exploration and evaluation expenditures	$	45,571	$	-	$	45,571
General and administrative expense		31,347		135,049		166,396
Foreign exchange (gain) loss		(11,406)		1,394		(10,012)
Depreciation expense		126		-		126
	$	65,638	$	136,443	$	202,081

16. Income taxes

• (a) Provision for income taxes

Major items causing the Company’s income tax rate to differ from the combined Canadian federal and provincial statutory rate of 26.5% (2018 – 26.5%) were as follows:

		Year ended	Year ended	Year ended
	December 31,		December 31,
		2019		2018
Loss before income taxes	$	(184,311)	$	(202,081)
Expected income tax recovery based on statutory rate		(49,000)		(54,000)
Adjustment to expected income tax benefit:
Change in tax rate		-		(10,000)
Change in benefits not realized		(12,000)		65,000
Other		61,000		(1,000)
Deferred income taxprovision(recovery)	$	-	$	-

• 21 -

Austin Resources Ltd. Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

16. Income taxes (continued)

• (b) Deferred income tax

Deferred income tax assets have not been recognized in respect of the following deductible temporary differences:

	As	at		As at
	December 31,		December 31,
	2019			2018
Non-capital loss carry-forwards – Canada	$	1,353,000	$	1,082,000
Share issue costs		43,000		-
Resource property costs		300,000		300,000
Non-capital loss carry-forwards – Chile		797,000		735,000
Total	$	2,493,000	$	2,117,000

The Company has approximately 408,501,000 Chilean Pesos ($797,000) of non-capital losses in Chile and approximately $1,353,000 of non-capital losses in Canada, which under certain circumstances can be used to reduce the taxable income of future years. The Canadian losses expire starting 2031 through to 2038. The Chilean loss can be carried forward indefinitely.

Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profits will be available against which the Company and its subsidiary will be able to utilize the benefits.

17. Commitments and contingencies

The Company’s exploration activities were subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.

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Notes to Consolidated Financial Statements Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars)

Austin Resources Ltd.

18. Subsequent events

(i) On February 27, 2020, the Company transferred all of its interest in the mineral exploration properties in Chile held by Minera Azul. The Company retained 1% net smelter royalty on its interest transferred of which 50% can be acquired for US$63,166. As a result of the completion of the agreement with Bluerock Resources SPA, Minera Azul will no longer have any assets and the Company intends to wind-up operations in Chile and dispose of its interest in Minera Azul.

Additionally, the Company had been advised by the Exchange that, with the closing of the transfer of all of its interests in the mineral exploration properties in Chile, the Company ceased to have active operations, no longer met the continued listing requirements of the Exchange and was transferred to the NEX. As a result of such transfer to the NEX, the Company’s trading symbol changed from AUT to AUT.H .

(ii) Novel Coronavirus (“COVID-19”)

The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.

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