Bitterroot Resources Ltd. — Annual Report 2022

Feb 24, 2023

BITTERROOT RESOURCES LTD.

CONSOLIDATED FINANCIAL STATEMENTS October 31, 2022 and 2021

(Expressed in Canadian Dollars)

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INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Bitterroot Resources Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Bitterroot Resources Ltd. (the “Company”), which comprise the consolidated statements of financial position as at October 31, 2022 and 2021, and the consolidated statements of loss and comprehensive loss, cash flows, and changes in shareholders’ equity for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at October 31, 2022 and 2021, and its financial performance and its 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, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 of the consolidated financial statements, which indicates that as at October 31, 2022, the Company has incurred losses since inception, had a working capital of $35,112 and had an accumulated deficit of $29,796,004. As stated in Note 1, these events and conditions indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information obtained at the date of this auditor's report includes Management’s Discussion and Analysis.

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

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements, or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

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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 to cease operations, or has no realistic alternative but to do so.

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

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

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

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

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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 on the audit resulting in this independent auditor’s report is Carmen Newnham.

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Vancouver, Canada February 23, 2023

Chartered Professional Accountants

BITTERROOT RESOURCES LTD. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars)

Note	October 31, 2022 October 31, 2021
ASSETS Current assets Cash Receivables 4 Prepaid expenses Total current assets Non-current assets Reclamation deposits Right-of-use asset 5 Exploration and evaluation assets 6 Total non-current assets TOTAL ASSETS	$ 105,320 $ 736,386 - 7,385 3,214 3,214
	108,534 746,985
	36,589 45,789 35,362 35,414 5,233,231 5,481,419
	5,305,182 5,562,622
	$ 5,413,716 $ 6,309,607
LIABILITIES Current liabilities Accounts payable and accrued liabilities Lease liability 5 Total current liabilities Non-current liabilities Lease liability 5 Total non-current liabilities Total liabilities SHAREHOLDERS’ EQUITY Share capital 8 Equity reserves 8 Deficit Total shareholders’ equity TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 52,461 $ 110,034 20,961 16,528
	73,422 126,562
	21,990 22,407
	21,990 22,407
	95,412 148,969
	30,236,730 29,418,271 4,877,578 4,746,550 (29,796,004) (28,004,183)
	5,318,304 6,160,638
	$ 5,413,716 $ 6,309,607

Nature of operations (Note 1) Subsequent events (Note 14)

“ Michael S. Carr” “George W. Sanders” Michael S. Carr, Director George W. Sanders, Director

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

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BITTERROOT RESOURCES LTD. CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS For the years ended October 31, 2022 (Expressed in Canadian Dollars)

	Notes		2022		2021
EXPENSES
Amortization	5	$	18,395	$	18,477
Foreign exchange			(61,340)		(3,742)
Interest expense	5		9,254		4,858
Management fees	10		120,000		120,000
Office and miscellaneous			25,493		27,467
Professional fees	10		97,091		107,312
Project investigation			-		11,172
Regulatory fees			-		9,159
Share-based compensation	8,10		128,608		520,801
Shareholder information			45,449		55,947
Transfer agent and filing fees			18,310		12,473
Write-down of exploration and
evaluation assets, net of recoveries	6		1,390,561		-
Loss and comprehensive loss for the
year		$	(1,791,821)	$	(883,924)
Basic and diluted loss per share		$	(0.02)	$	(0.01)
Weighted average number of common
shares outstanding – basic and diluted			85,178,896		71,818,838

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

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BITTERROOT RESOURCES LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended October 31, (Expressed in Canadian Dollars)

		2022			2021
Cash flows used in operating activities
Loss for the year	$	(1,791,821)	$		(883,924)
Items not involving cash:
Amortization		18,395			18,477
Interest expense		9,254			4,858
Share-based compensation		128,608			520,801
Write-down of exploration and evaluation assets		1,390,561			-
Changes in non-cash working capital items:
Prepaid expenses		-			4,096
Receivables		7,385			(2,440)
Accounts payable and accrued liabilities		13,951			(101,845)
Due to related party		-			(30,136)
		(223,667)			(470,113)
Cash flows used in investing activities
Exploration and evaluation asset expenditures		(1,747,608)			(1,599,323)
Cost recoveries for exploration and evaluation assets		546,711			554,978
Reclamation deposit		9,200			(34,189)
		(1,191,697)			(1,078,534)
Cash flows from financing activities
Private placements		808,500			2,159,900
Share issuance costs		(16,321)			(53,750)
Stock options exercised		15,000			112,500
Warrants exercised		700			231,754
Lease payments		(23,581)			(22,407)
Loan from related party		-			(160,000)
		784,298			2,267,997
Change in cash		(631,066)			719,350
Cash, beginning		736,386			17,036
Cash, ending	$	105,320		$	736,386

Supplemental disclosure with respect to cash flows (Note 9).

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

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BITTERROOT RESOURCES LTD. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Expressed in Canadian Dollars)

	Number of		Share		Equity
	shares		capital		reserves		Deficit		Total
Balance – October 31, 2020	47,456,985	$	26,938,050	$	4,222,566	$	(27,120,259)	$	4,040,357
Private placements	28,535,000		2,159,900		-		-		2,159,900
Share issuance costs	-		(95,454)		41,704		-		(53,750)
Shares issued for warrants exercised	2,742,571		231,754		-		-		231,754
Shares issued for stock options
exercised	1,250,000		151,021		(38,521)		-		112,500
Shares issued for property payments	200,000		33,000		-		-		33,000
Share based payments	-		-		520,801		-		520,801
Loss for the year	-		-		-		(883,924)		(883,924)
Balance – October 31, 2021	80,184,556	$ 29,418,271		$	4,746,550	$	(28,004,183)	$	6,160,638
Private placements	8,085,000		808,500		-		-		808,500
Share issuance costs	-		(24,775)		8,454		-		(16,321)
Shares issued for warrants exercised	14,000		1,004		(304)		-		700
Shares issued for stock options
exercised	150,000		20,730		(5,730)		-		15,000
Shares issued for property payments	150,000		13,000		-		-		13,000
Share based payments	-		-		128,608		-		128,608
Loss for the year	-		-		-		(1,791,821)		(1,791,821)
Balance – October 31, 2022	88,583,556	$ 30,236,730		**$ **	4,877,578	$	(29,796,004)	$	5,318,304

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

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BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

1. NATURE OF OPERATIONS

Bitterroot Resources Ltd. (the “Company”) is in the exploration stage and its principal business activity is the sourcing and exploration of resource properties.

The Company was incorporated on March 13, 1951 under the Laws of British Columbia, Canada. The Company’s head office address is Suite 206-B – 1571 Bellevue Avenue, West Vancouver, BC, V7V 1A6, Canada and its registered office address is Suite 1130 – 400 Burrard Street, Vancouver, BC, V6C 3A6, Canada. The Company is listed on the TSX Venture Exchange (“Exchange”) under the symbol “BTT”.

These consolidated financial statements have been prepared assuming the Company will continue on a going concern basis. The Company has incurred losses since its inception and the ability of the Company to continue as a going concern depends on its ability to raise adequate financing and to develop profitable operations. The Company had working capital of $35,112 at October 31, 2022 (2021 – $620,423). As of October 31, 2022, the Company had accumulated deficit of $29,796,004.

Management is actively targeting sources of additional financing through alliances with financial, exploration and mining entities, and other business and financial transactions which would assure continuation of the Company’s operations and exploration programs. In addition, management closely monitors commodity prices of precious metals, individual equity movements, and the stock market to determine the appropriate course of action to be taken by the Company if favorable or adverse market conditions occur.

As the Company is in the exploration and evaluation stage, the Company has not identified a known body of commercial grade mineral on any of its properties. The ability of the Company to realize the costs it has incurred to date on these properties is dependent upon the Company identifying a commercial mineral body, to finance its development costs and to resolve any environmental, regulatory or other constraints, which may hinder the successful development of the property. To date, the Company has not earned any revenues. The Company expects to incur further losses in the development of its business. These circumstances comprise a material uncertainty which may cast significant doubt on the Company’s ability to continue as a going concern.

The consolidated financial statements of the Company are presented in Canadian dollars, which is the functional currency, unless otherwise indicated.

2. BASIS OF PREPARATION

Statement of compliance and basis of measurement

These consolidated financial statements, including comparatives have been prepared using accounting policies consistent with 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 IFRS issued and effective as of October 31, 2022.

The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified as financial instruments at fair value through profit or loss, which are stated at their fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.

The consolidated financial statements were approved for issuance by the Board of Directors on February 23, 2023.

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates, judgments 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.

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BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

2. BASIS OF PREPARATION (cont’d)

Use of estimates and judgments (cont’d)

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

(i) Critical accounting estimates

Critical accounting estimates are estimates and assumptions made by management that may result in a material adjustment to the carrying amount of assets and liabilities within the next financial year and include, but are not limited to, the following:

Share based payments

The fair value of stock options issued are subject to the limitation of the Black-Scholes option pricing model that incorporates market data and involves uncertainty in estimates used by management in the assumptions. Because the Black-Scholes option pricing model requires the input of highly subjective assumptions, including the volatility of share prices, changes in subjective input assumptions can materially affect the fair value estimate.

Exploration and evaluation assets

Recorded costs of exploration and evaluation assets are not intended to reflect present or future values of these properties. The recorded costs are subject to measurement uncertainty and it is reasonably possible, based on existing knowledge, that change in future conditions could require a material change in the recognized amount.

(ii) Critical accounting judgments

There are currently no critical accounting judgements.

Going concern

These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the ordinary course of operations. These consolidated 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 thus be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in these consolidated financial statements.

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

The consolidated financial statements include the accounts of the Company, and its wholly owned subsidiaries Trans Superior Resources, Inc. and Voyageur Lands Corporation, both of which are holding companies incorporated in Michigan, USA. All significant inter-company balances and transactions have been eliminated upon consolidation.

Exploration and evaluation assets

Pre-exploration costs

Pre-exploration costs are expensed in the period in which they are incurred.

Exploration and evaluation expenditures

Once the legal right to explore a property has been acquired, all costs related to the acquisition, exploration and evaluation of exploration and evaluation assets are capitalized by property. These direct expenditures include such costs as materials used, surveying costs, drilling costs, payments made to contractors and depreciation on plant and equipment during the exploration phase. Costs not directly attributable to exploration and evaluation activities, including general and administrative overhead costs, are expensed in the period in which they occur.

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BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Exploration and evaluation assets (cont’d)

The Company may occasionally enter into farm-out arrangements, whereby the Company will transfer part of a mineral interest, as consideration, for an agreement by the farmee to meet certain exploration and evaluation expenditures which would have otherwise been undertaken by the Company. The Company does not record any expenditures made by the farmee on its behalf. Any cash consideration received from the agreement is credited against the costs previously capitalized to the mineral interest given up by the Company, with any excess cash accounted for as a gain on disposal.

When a project is deemed to no longer have commercially viable prospects to the Company, exploration and evaluation expenditures in respect of that project are deemed to be impaired. As a result, those exploration and evaluation expenditure costs, in excess of estimated recoveries, are written down to profit or loss.

The Company assesses exploration and evaluation assets for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount.

Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the property is considered to be a mine under development and is classified as “mines under construction.” Exploration and evaluation assets are also tested for impairment before the assets are transferred to development properties.

As the Company currently has no operational income, any incidental revenues earned in connection with exploration activities are applied as a reduction to capitalized exploration costs.

Foreign currency translation

The functional currency is the currency of the primary economic environment in which the entity operates and has been determined for each entity within the Company. The functional currency for all entities within the Company is the Canadian dollar. The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates.

Transactions in currencies other than the Canadian dollar are recorded at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, the monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the rate of exchange at the statement of financial position date while non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation are reflected in profit or loss for the year.

Loss per share

Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common shareholders by the weighted average number of shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that proceeds from such exercises were used to acquire common stock at the average market price during the reporting periods. For the periods presented, the calculations proved to be anti-dilutive.

Share-based payments

The Company accounts for stock options granted to directors, officers and employees at the fair value of the options granted. Accordingly, the fair value of the options at the date of the grant is determined using the Black-Scholes option pricing model and share-based compensation is accrued and charged to operations, with an offsetting credit to share based payment reserve, over the vesting periods. Stock options granted to non-employees are measured at the fair value of goods or services rendered or at the fair value of the instruments issued, if it is determined that the fair value of the goods or services received cannot be reliably measured. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

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BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Share-based payments (cont’d)

If and when the stock options are exercised, the applicable amounts of equity reserves are transferred to share capital.

The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information.

Warrants issued in equity financing transactions

The Company engages in equity financing transactions to obtain the funds necessary to continue operations and explore and evaluate mineral properties. These equity financing transactions may involve issuance of common shares or units. Each unit comprises a certain number of common shares and a certain number of share purchase warrants. Depending on the terms and conditions of each equity financing agreement, the Warrants are exercisable into additional common shares at a price prior to expiry as stipulated by the agreement. Warrants that are part of units are assigned a value based on the residual value method and included in share capital with the common shares that were concurrently issued. Warrants that are issued as payment for agency fees or other transactions costs are accounted for as share-based payments.

Income taxes

Income tax expense 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. Current tax expense is the expected tax payable on 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 for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for relating to goodwill not deductible for tax purposes, the initial recognition of assets and liabilities that affect neither accounting nor taxable loss and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. 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 statement of financial position 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 utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, it is not recorded.

Flow-through shares

The Company will, from time to time, issue flow-through common shares to finance a significant portion of its exploration program. Pursuant to the terms of flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates the flow-through share into i) a flow-through share premium, equal to the estimated premium, if any, investors pay for the flow-through feature, which is recognized as a liability, and ii) share capital. Upon expenses being incurred, the Company derecognizes the liability and the premium is recognized as other income.

Decommissioning and restoration provision

The Company records a liability based on the best estimate of costs for site closure and reclamation activities that the Company is legally or constructively required to remediate and the liability is recognized at the time environmental disturbance occurs. The resulting costs are capitalized to the corresponding asset. The provision for closure and reclamation liabilities is estimated using expected cash flows, based on engineering and environmental reports prepared by third party industry specialists, discounted at a pre-tax rate specific to the liability. The capitalized amount is depreciated on the same basis as the related asset. The liability is adjusted for the accretion of the discounted obligation and any changes in the amount or timing of the underlying future cash flows. Significant judgements and estimates are involved in forming expectations of the amounts and timing of future closure and reclamation cash flows.

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BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Decommissioning and restoration provision (cont’d)

Changes in closure and reclamation estimates are accounted for as a change in the corresponding capitalized cost.

Cost of rehabilitation projects for which a provision has been recorded are recorded directly against the provision as incurred, most of which are incurred at the end of the life of mine.

For the year presented, there were no significant decommissioning provisions.

Cash

Cash includes demand deposits and guaranteed investment certificates that on acquisition have a term to maturity of three months or less, or may be redeemed during this period. Face value represents the fair value due to the highly liquid nature of the investment certificates.

Financial instruments

Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive (loss) income (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.

The Company classifies its financial instruments as follows:

Financial assets/ liabilities	IFRS 9 Classification
Cash	FVTPL
Reclamation deposits	FVTPL
Accounts payable and accrued liabilities	Amortized cost
Lease liability	Amortized cost

Measurement

Financial assets at FVTOCI

Elected investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses recognized in other comprehensive income (loss).

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statements of loss and comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the statements of loss and comprehensive loss in the period in which they arise. Where management has opted to recognize a financial liability at FVTPL, any changes associated with the Company’s own credit risk will be recognized in other comprehensive income (loss).

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BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Financial instruments (cont’d)

Impairment of financial assets at amortized cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost.

At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the statements of loss and comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

Derecognition

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the statements of income (loss) and comprehensive income (loss). However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive income (loss).

Financial liabilities

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the statements of loss and comprehensive loss.

Leases

At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Leases of right-of-use assets are recognized at the lease commencement date at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined, and otherwise at the Company’s incremental borrowing rate. At the commencement date, a right-of-use asset is measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received.

Each lease payment is allocated between repayment of the lease principal and interest. Interest on the lease liability in each period during the lease term is allocated to produce a constant periodic rate of interest on the remaining balance of the lease liability. Except where the costs are included in the carrying amount of another asset, the Company recognizes in profit or loss (a) the interest on a lease liability and (b) variable lease payments not included in the measurement of a lease liability in the period in which the event or condition that triggers those payments occurs. The Company subsequently measures a right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses; and adjusted for any remeasurement of the lease liability. Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term, except where the lease contains a bargain purchase option a right-of-use asset is depreciated over the asset’s useful life.

14

BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

4. RECEIVABLES

The Company’s receivables arise from goods and services tax (“GST”) receivable due from the Canadian taxation authorities.

	October	31,	2022	October	31,	2021
GST receivable		$	-	$		7,385

5. RIGHT-OF-USE ASSET AND LEASE LIABILITY

The Company entered a contractual arrangement to lease an office for 4 years starting November 1, 2019. The terms of the lease call for minimum monthly lease payments of $1,867. The Company record a right-of use asset of $72,369 based on the corresponding lease obligation as of November 1, 2019.

During the year ended October 31, 2022, the lease agreement was extended by one year. The right-of-use asset and lease obligation were increased by $18,343 to accommodate the extension of the lease period without any impact on deficit. The new terms of the lease call for minimum monthly lease payments of $1,960, starting from October 2021.

When measuring the present value of lease obligations, the Company uses a discount rate of 10%.

The change in the right-of-use asset during the year ended October 31, 2022 was as follows:

	Right	of Use
Balance – October 31, 2020	$	53,891
Amortization		(18,477)
Balance – October 31, 2021		35,414
Additions		18,343
Amortization		(18,395)
Balance– October 31, 2022	$	35,362

The change in the lease liability during the year ended October 31, 2022 was as follows:

	Lease	Liability
Balance – October 31, 2020	$	56,484
Lease payments made		(22,407)
Interest expense		4,858
Balance – October 31, 2021		38,935
Additions		18,343
Lease payments made		(23,581)
Interest expense		9,254
		42,951
Less: current portion		(20,961)
Balance– October 31, 2022	$	21,990

15

BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

5. RIGHT-OF-USE ASSET AND LEASE LIABILITY (cont’d)

Future lease payments are as follows for the years ending October 31:

2023	$24,316
2024	$23,104

16

BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

6. EXPLORATION AND EVALUATION ASSETS

	Michigan Lands, **Michigan, USA **	Michigan Lands, **Michigan, USA **	Coyote Sinter Property, Nevada, **USA **	Coyote Sinter Property, Nevada, **USA **	Castle West, Nevada, USA	Castle West, Nevada, USA	Castle West, Nevada, USA		Total
Balance– October 31, 2020	$	4,240,687	$	42,045	$		67,804	$	4,350,536
Acquisition costs - cash		58,661		50,432			38,299		147,392
Acquisition costs - shares		20,000		13,000			-		33,000
Claims, leases and permits		10,594		9,323			7,581		27,498
Consulting and professional		122,661		18,825			5,132		146,618
Drilling		1,168,269		-			-		1,168,269
Field supplies		3,167		-			-		3,167
Geochemistry		1,710		706			-		2,416
Geophysics		23,036		92,532			-		115,568
Ground transportation		11,271		2,722			548		14,541
Other		2,441		1,046			30		3,517
Room and board		13,125		3,077			467		16,669
Travel and freight		6,623		-			583		7,206
Expenditures during the year		1,441,558		191,663			52,640		1,685,861
Recovery of costs		(554,978)		-			-		(554,978)
Balance– October 31, 2021		5,127,267		233,708			120,444		5,481,419
Acquisition costs - cash		25,880		71,535			69,608		167,023
Acquisition costs - shares		9,500		3,500			-		13,000
Claims, leases and permits		8,886		28,132			7,065		44,083
Consulting and professional		48,629		69,982			1,433		120,044
Courier and postage		-		158			65		223
Drilling		536,035		745,440			-		1,281,475
Field supplies		340		5,872			89		6,301
Fuel		-		213			98		311
Geochemistry		6,139		-			-		6,139
Geophysics		1,170		700			-		1,870
Ground transportation		4,032		9,298			586		13,916
Other		3,056		1,374			-		4,430
Room and board		3,936		15,920			1,463		21,319
Travel and freight		5,072		2,798			1,080		8,950
Expenditures during the year		652,675		954,922			81,487		1,689,084
Write-off of resource properties		-		(1,188,630)		(201,931)			(1,390,561)
Recovery of costs		(546,711)		-			-		(546,711)
Balance– October 31, 2022	$	5,233,231	$	-	$		-	$	5,233,231

17

BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

6. EXPLORATION AND EVALUATION ASSETS (cont’d)

Title to exploration and evaluation assets involves certain inherent risks due to difficulties of determining the validity of certain claims, as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many exploration and evaluation assets. The Company has investigated title to its exploration and evaluation assets and to the best of its knowledge, title to its exploration and evaluation assets are in good standing.

Michigan Lands, Michigan, U.S.A.

During the year ended October 31, 2015, a subsidiary of Altius Minerals Corporation acquired a 50.1% interest in the Company’s Michigan Lands by funding $600,000 of exploration expenditures. Altius had the right to acquire an additional 19.9% of the properties by completing $2.5 million in exploration spending by September 29, 2021, plus the right to acquire an additional 10% of the properties by completing exploration spending of a further $5,000,000 or completing an NI 43-101 compliant pre-feasibility study on a mineral resource on the properties, before September 29, 2025. Altius failed to complete the additional expenditures required prior to September 29, 2021 and both options have expired. The Company (49.9%) and Altius (50.1%) are effectively joint venture partners, although a formal joint venture agreement has not yet been entered into. The Company also granted to Altius a 2% net smelter returns royalty (“NSR”) on the Voyageur Lands (covering approximately 250 square miles of mineral rights) and assigned to Altius its right to repurchase a 1% NSR held by a third party on the Copper Range Lands by paying $1,000,000 U.S. to the third party before December 31, 2048.

Mineral Rights Leased from the State of Michigan

During the year ended October 31, 2016, the Company (49.9%) and Altius (50.1%) acquired State of Michigan metallic minerals leases covering 3,051 acres. A cash bond of US$30,000 has been posted by a subsidiary of Altius.

LM Property

The Company’s Michigan subsidiary, Trans Superior Resources, Inc., leases 40 acres of minerals rights in Baraga County, Michigan, known as the LM Property. The lessors have granted the Company the option to reduce the current 3% NSR to a 2% NSR by paying US$1,000,000 prior to December 31, 2064. The 2022 advance royalty payment is US$170/acre (paid). The advance royalty payments increase by $10/acre/year. The LM Property is not subject to the joint venture with Altius.

During the year ended October 31, 2020, the Company, through its US subsidiary Trans Superior Resources, Inc., entered into an option/joint venture agreement whereby Below Exploration, Inc., (“Below”) a private Michigan corporation, could earn a 49% joint venture interest in the Company’s 100%-leased LM nickel-copper-platinum-palladium property in Baraga County, Michigan. During the year ended October 31, 2020, Below funded $370,061 (US$285,000) of exploration expenditures prior to the first anniversary of the agreement and earned a 49% joint venture interest. The Company is the project operator, regardless of its ownership level, and retains a right of first refusal over Below’s property interest. Following vesting of its 49% interest, Below had a 90-day option to convert its interest in the project into the Company’s shares. Below did not exercise the share conversion option and the joint venture is continuing.

In February 2021, the Company entered into a minerals lease and purchase option with a privately-held corporation (“MPC”) covering 80 acres of mineral rights adjacent to the LM Property. MPC leases the mineral rights exclusively to the Company for a term of forty years. Under the term of the agreement the Company is required to make the following payments and share issuances:

(i) US$15,000 (paid) and issuance of 100,000 common shares within 10 days of the TSX-V approval date, February 25, 2021 (the “Approval Date”) (issued);

(ii) US$15,000 (paid) and issuance of 100,000 (issued at a fair value of $9,500) common shares on the first anniversary of the Approval Date;

(iii) US$16,000 and issuance of 100,000 (issued subsequent year end) common shares on the second anniversary of the Approval Date;

(iv) an amount equal to the rental payment of the preceding year, plus an additional US$20 per acre of the mineral rights, on or before each anniversary of the Approval Date commencing on the third anniversary and continuing so long as the agreement is in effect.

18

BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

6. EXPLORATION AND EVALUATION ASSETS (cont’d)

At any time while the agreement remains in effect, the Company has the exclusive right and option to purchase the mineral rights from MPC for US$1,000/acre for the first five years of the agreement, US$2,500/acre in years 6 through 10, and then escalating US$2,500/acre for each subsequent five years for the first 20 years. MPC will retain a 2% net smelter royalty (“NSR”) for products from the mineral rights generated from underground mining and a 3% NSR for products from the mineral rights generated from open-pit mining. The Company will have the option to purchase 1% of each of the NSRs from US$1,000,000 and a further option to purchase an additional 1% of the NSR from open-pit mining for an additional US$1,000,000.

Coyote Sinter Property, Nevada, U.S.A.

During the year ended October 31, 2020, the Company, through its US subsidiary Trans Superior Resources, Inc., entered into a mining lease, with an option to purchase, with Geological Services, Inc on the 13- claim Coyote Sinter gold/silver project in Elko County, Nevada. In the year ended October 31, 2021, and prior to sale of Geologic Services, Inc. to a third party, the vendor’s claims were transferred to a new company, GoldPlay LLC (“GoldPlay”), which is controlled by the original vendor. The Company is required to make the following advance minimum royalty (“AMR”) payments and share issuances to GoldPlay:

(i) US$10,000 (paid) and the issuance of 100,000 common shares within 10 days of the TSX-V approval date, August 4, 2020 (the “Approval Date”) (issued).

(ii) US$10,000 (paid) on the 6-month anniversary of the Approval Date;

(iii) US$30,000 (paid) and the issuance of 100,000 common shares (issued) in the capital of the Company on or before the first annual anniversary of the Approval Date;

(iv) US$40,000 (paid) and the issuance of 50,000 (issued at a fair value of $3,500) common shares in the capital of the Company on or before the second annual anniversary of the Approval Date;

(v) US$60,000 and the issuance of 50,000 common shares in the capital of the Company on or before the third annual anniversary of the Approval Date;

(vi) US$100,000 on or before the fourth annual anniversary of the Approval Date;

(vii) US$125,000 on or before the fifth annual anniversary of the Approval Date;

(viii) US$125,000 on or before each annual anniversary of the Approval Date after the fifth anniversary as long as the agreement remains in effect, adjusted for inflation from that date.

At any time while the agreement remains in effect, the Company has the exclusive right and option to purchase the Coyote Sinter property from GoldPlay by paying US $2,000,000, less the sum of all AMR payments already paid to GoldPlay, up to the date of exercise. GoldPlay will retain a 2% NSR, less previous AMR payments, on the Coyote Sinter property and on any Company-located federal mining claims within a 1 mile area of interest (“AOI”). They Company has the option to purchase 1% of the NSR for US$2,000,000. GoldPlay will also retain a 1% NSR on any mineral rights acquired from 3rd parties within the AOI. The Company has the option to purchase 0.5% of this 1% NSR for US$500,000. The royalty purchase options are exercisable at any time prior to commercial production. During the year ended October 31, 2022, the Company drilled 885 metres in three core holes to test below a previous operator’s anomalous drill results. Weakly anomalous mineralization was intersected and the project was reclaimed and abandoned. The Company wrote down exploration and evaluation costs of $1,188,630 related to the property.

19

BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

6. EXPLORATION AND EVALUATION ASSETS (cont’d)

Castle West Property, Nevada, U.S.A.

During the year ended October 31, 2019, the Company, through its US subsidiary Trans Superior Resources, Inc., entered into an option agreement with Ely Gold Royalties Inc. and its subsidiary Nevada Select Royalty Inc. (“Ely Gold”), to purchase a 100% interest in the Castle West gold/silver property in Esmeralda County, Nevada. The Castle West property is comprised of 34 unpatented mining claims and three leased unpatented claims. Under the terms of the agreement, the Company has paid Ely Gold US$1,000. During the year ended October 31, 2020, the terms of the option agreement were changed due to the Company’s inability to access and explore the Castle West property due to the State of Nevada’s COVID-19 related legislation. Under the amended option terms, the Company paid Ely Gold US$15,000 on December 11, 2020. On, or prior to each of the second, third and fourth anniversaries of December 11, 2020 the Company will pay US$40,000 (the second payment was made on December 10, 2021 at a Canadian equivalent of $50,829). A final payment of US$105,000 will be made on the fifth anniversary for the conveyance of the 100% interest in the property. Following exercise of the option agreement with Ely Gold, the Company will make minimum advance royalty payments of US$5,000 on the first and second anniversaries of exercising the option and US$10,000 on subsequent anniversaries. Ely Gold will retain a 3% NSR on the 34 claims it staked. The Company has the right to buy down 1% of this NSR for a payment of US$1,000,000. The Company also makes annual payments of US$15,000 to the lessor of the three unpatented claims (annual payment made on January 12, 2022 at a Canadian equivalent of $18,780). Upon the exercise of the option, the Company will be assigned the three-claim lease and Ely Gold will retain a 1% NSR on these claims. During the year ended October 31, 2022, the Company conducted additional geologic mapping and rock sampling. The results obtained did not justify making the required annual payments to the vendors and the option agreements were terminated subsequent to the financial year end. The Company wrote down exploration and evaluation costs of $201,931 related to the property.

7. LOAN PAYABLE TO RELATED PARTY

During the year ended October 31, 2021, the Company repaid loans of $160,000 from a non-arm’s length party.

8. SHARE CAPITAL AND EQUITY RESERVES

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

As at October 31, 2022, the Company had 88,583,556 shares issued and outstanding.

During the year ended October 31, 2022, the Company:

• (i) closed a private placement of 8,085,000 units priced at $0.10 per unit for gross proceeds of $808,500. Each unit consists of one common share and one-half share purchase warrant, exercisable at $0.20 for two years from the date of issuance. Finder’s fees paid in conjunction with the private placement consisted of $16,321 cash and the issuance of 119,000 finders’ warrants at a fair value of $8,454;

• (ii) issued 14,000 shares for brokers’ warrants exercised for total proceeds of $700;

(iii) issued 150,000 shares for stock options exercised for total proceeds of $15,000; and

(iv) issued 150,000 shares for property option payments with fair value of $13,000.

20

BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

8. SHARE CAPITAL AND EQUITY RESERVES (cont’d…)

During the year ended October 31, 2021, the Company:

• (i) closed a private placement of 17,340,000 units priced at $0.06 per unit for gross proceeds of $1,040,400. Each unit consists of one common share and one-half share purchase warrant, exercisable at $0.12 for two years from the date of issuance. Finder’s fees and other share issuance costs paid in conjunction with the private placement consisted of $29,655 and the issuance of 329,400 finders’ warrants at a fair value of $29,611, exercisable at $0.12 for two years from the date of issuance.

• (ii) closed a private placement of 11,195,000 units priced at $0.10 per unit for gross proceeds of $1,119,500. Each unit consists of one common share and one-half share purchase warrant, exercisable at $0.20 for two years from the date of issuance. Finder’s fees and other share issuance costs paid in conjunction with the private placement consisted of $24,095 and the issuance of 124,000 finders’ warrants at a fair value of $12,093, exercisable at $0.20 for two years from the date of issuance.

(iii) issued 2,742,571 shares for warrants exercised for total proceeds of $231,754;

(iv) issued 1,250,000 shares for stock options exercised for total proceeds of $112,500 and

(v) issued 200,000 shares for a property option payment and recorded at a fair value of $33,000.

Warrants

Warrant transactions are summarized as follows:

Warrant transactions are summarized as follows:
		Weighted
	Number of	Average
	Warrants	Exercise Price
Balance – October 31, 2020	2,613,171	$ 0.08
Issued	14,721,100	0.15
Exercised	(2,742,571)	0.08
Expired	(6,600)	0.11
Balance – October 31, 2021	14,585,100	0.15
Issued	4,161,500	0.20
Exercised	(14,000)	0.05
Balance – October 31, 2022	18,732,600	$0.16

As at October 31, 2022, the following share purchase warrants were issued and outstanding:

	Number of
Expiry Date	Warrants	Exercise Price
December 3, 2022	8,849,400	$ 0.12*
May 4, 2023	5,721,700	0.20
March 29,2024	4,161,500	0.20
	18,732,600	$0.16

*Subsequent to October 31, 2022, 8,849,400 warrants expired unexercised.

21

BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

8. SHARE CAPITAL AND EQUITY RESERVES (cont’d…)

Warrants (cont’d…)

The weighted average fair value of each finders’ warrant issued during the year ended October 31, 2022 was $0.19 (year ended October 31, 2021 - $0.14), calculated using the Black-Scholes option-pricing model on the issue date using the following weighted average assumptions:

	Year ended	Year ended
	October 31, 2022	October 31, 2021
Volatility	154.83%	183.34%
Risk-free interest rate	2.34%	0.27%
Expected life	2years	2years

Stock options

The Company, in accordance with the policies of the Exchange, has a stock option plan in place under which it is authorized to grant options to directors, employees, and consultants, to acquire up to 10% of the issued and outstanding common shares. Under the plan, the exercise price of each option equals the market price of the Company’s stock as calculated on the date of grant. The options can be granted for a maximum term of five years. Pursuant to the stock option plan, vesting restrictions may be applied to certain other options grants, at the discretion of the directors.

Stock option transactions and the number of stock options outstanding are summarized as follows:

		Weighted
	Number	Average
	Of Options	Exercise Price
Balance – October 31, 2020	4,270,000	$ 0.11
Expired	(200,000)	0.10
Exercised	(1,250,000)	0.09
Granted	3,350,000	0.16
Balance – October 31, 2021	6,170,000	0.15
Expired	(670,000)	0.32
Exercised	(150,000)	0.10
Granted	1,250,000	0.10
Balance– October 31, 2022	6,600,000	$ 0.12

As at October 31, 2022, the following stock options were outstanding and exercisable:

Number of Options	Exercise Price ($)	Expiry Date
900,000	0.08	March 1, 2023
1,100,000	0.05	May 19, 2025
2,000,000	0.16	January 4, 2026
1,350,000	0.17	June 1, 2026
1,250,000	0.10	April 21, 2027
6,600,000

22

BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

8. SHARE CAPITAL AND EQUITY RESERVES (cont’d…)

Stock options (cont’d…)

The weighted average fair value of each stock option granted during the year was $0.10 (year ended October 31, 2021 - $0.16), calculated using the Black-Scholes option-pricing model on the grant date using the following weighted average assumptions:

	Year ended	Year ended
	October 31, 2022	October 31, 2021
Volatility	160.52%	173.90%
Risk-free interest rate	2.74%	0.42%
Expected life	5 years	5 years

Share based compensation

Total share-based payments recognized for stock options granted during the year ended October 31, 2022, was $128,608 (2021 - $520,801).

9. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

Significant non-cash transactions during the year ended October 31, 2022 included:

(a) Included in exploration and evaluation assets of $23,092 which relates to accounts payable and accrued liabilities.

(b) Transferred $304 to share capital from reserves for 14,000 brokers’ warrants exercised.

(c) Transferred $5,730 to share capital from reserves for 150,000 stock options exercised.

(d) Issued 119,000 brokers’ warrants with a fair value of $8,454.

• (e) Issued 150,000 shares for property option payments with fair value of $13,000.

Significant non-cash transactions during the year ended October 31, 2021 included:

(a) Included in exploration and evaluation assets is $94,616 which relates to accounts payable and accrued liabilities.

• (b) Issued 453,400 brokers’ warrants with a fair value of $41,704.

(c) Issued 200,000 shares for a property option payment, recorded at a fair value of $33,000.

(d) Transferred $38,521 to share capital from reserves for 1,250,000 stock options exercised.

23

BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

10. RELATED PARTY TRANSACTIONS

Key management personnel are the persons responsible for the planning, directing and controlling the activities of the Company and include both executive and non-executive directors, and entities controlled by such persons. The Company considers all Directors and Officers of the Company to be key management personnel.

The following is a summary of related party transactions and balances during the year ended October 31, 2022, not disclosed elsewhere in the consolidated financial statements:

• (a) Management fees of $120,000 (2021 - $120,000) and professional fees of $4,563 (2021 - $6,050) were incurred from a company controlled by a director of the Company.

• (b) Share based compensation include stock options granted to directors and officers recorded at a fair value of $92,598 (2021 - $397,089).

11. SEGMENTED INFORMATION

Industry information

The Company operates in one reportable operating segment, being the acquisition, exploration and development of exploration and evaluation assets.

Geographic information

The Company operated in both Canada and the United States. The Company’s reclamation deposits and exploration and evaluation assets are located in Canada and the United States.

12. FINANCIAL INSTRUMENTS AND CAPITAL MANAGEMENT

Capital management

The Company manages its capital to safeguard the Company’s ability to continue as a going concern, so that it can continue to provide adequate returns to shareholders and benefits to other stakeholders, and to have sufficient funds on hand for business opportunities as they arise.

The Company considers the items included in share capital as capital. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may issue new shares through short-term prospectuses and private placements or return capital to shareholders. As at October 31, 2022, the Company is not subject to externally imposed capital requirements.

The Company is exposed to various financial instrument risks and assesses the impact and likelihood of this exposure. These risks include liquidity risk, credit risk, currency risk, interest rate risk and price risk. Where material, these risks are reviewed and monitored by the Board of Directors.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company is considered to be in the exploration stage. Thus, it is dependent on obtaining regular financings in order to continue its exploration programs. Despite previous success in acquiring these financings, there is no guarantee of obtaining future financings. The Company's cash consists of cash deposited in business accounts and redeemable guaranteed investment certificates held by high credit quality financial institutions. The Company is not invested in any asset backed commercial paper.

Credit risk

Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its cash, receivables and reclamation deposits. The Company limits exposure to credit risk by maintaining its cash and reclamation deposits with high-credit quality financial institutions. Deposits held with these institutions may exceed the amount of insurance provided on such deposits. The receivables balance consists mainly of GST recoverable. There is ongoing review to evaluate the credit worthiness of these counterparties. The Company’s maximum exposure to credit risk at the reporting date is the carrying value of cash, receivables and reclamation deposits.

24

BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

12. FINANCIAL INSTRUMENTS AND CAPITAL MANAGEMENT (cont’d…)

Currency risk

The Company's operations are in Canada and the United States. The international nature of the Company's operations results in foreign exchange risk as transactions are denominated in a foreign currency. The operating results and the financial position of the Company are reported in Canadian dollars. The fluctuations of the operating currencies in relation to the Canadian dollar will, consequently, have an impact upon the reported results of the Company and may also affect the value of the Company's assets and liabilities. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks at this time. A strengthening (weakening) of the Canadian dollar against the US dollar of 10% would not have a significant effect on net loss.

Interest rate risk

The Company's exposure to interest rate risk arises from the interest rate impact on its cash. The Company's practice has been to invest cash at floating rates of interest in order to maintain liquidity, while achieving a satisfactory return for shareholders. There is minimal risk that the Company would recognize any loss as a result of a decrease in the fair value of any guaranteed bank investment certificates included in cash as they are generally held with large financial institutions. The Company does not have any variable interest-bearing debt.

Price risk

The Company is exposed to price risk with respect to commodity prices. 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 the commodity prices of precious metals and the stock market to determine the appropriate course of action to be taken by the Company.

Fair value

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; and Level 3 – Inputs that are not based on observable market data.

The fair value of cash and reclamation deposits are measured based on level 1 inputs of the fair value hierarchy. The estimated fair value of accounts payable and accrued liabilities is equal to its carrying values due to the short-term nature of the instrument. The fair value of lease liability is initially recorded at fair value and subsequently carried at amortized cost using rates comparable to market interest rates.

13. INCOME TAXES

A reconciliation of income taxes at statutory rates with the reported taxes is as follows:

	2022 2021
Income (loss) for the year Expected income tax (recovery) Change in statutory, foreign tax, foreign exchange rates and other Permanent difference Share issuance costs Adjustment to prior years provision versus statutory tax returns Change in unrecognized deductible temporary differences	$ (1,791,821) $ (883,924)
	$ (484,000) $ (239,000) (2,000) 2,000 35,000 140,000 (4,000) (15,000) 375,000 (44,000) 80,000 156,000
Total income tax expense (recovery)	$ - $ -

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BITTERROOT RESOURCES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2022 and 2021 (Expressed in Canadian Dollars)

13. INCOME TAXES (cont’d)

The significant components of the Company’s unrecognized deferred tax assets and liabilities are as follows:

		2022		2021
Deferred tax assets (liabilities)
Exploration and evaluation assets	$	460,000	$	512,000
Allowable capital losses		33,000		33,000
Share issuance costs		13,000		13,000
Property and equipment		3,000		4,000
Non-capital losses available for future period		2,051,000		1,918,000
Potential deferred tax assets		2,560,000		2,480,000
Unrecognized deferred tax assets		(2,560,000)		(2,480,000)
Net deferred tax assets	$	-	$	-

The significant components of the Company’s temporary differences, unused tax credits and unused tax losses that have not been included on the consolidated statement of financial position are as follows:

			Expiry Date			Expiry Date
			Range			Range
		2022			2021
Temporary Differences
Exploration and evaluation assets	$	1,656,000	No expiry date	$	1,849,000	No expiry date
Investment tax credit		18,000	2032 to 2033		18,000	2032 to 2033
Property and equipment		10,000	No expiry date		16,000	No expiry date
Share issue costs		48,000	2042 to 2065		47,000	2042 to 2045
Allowable capital losses		123,000	No expiry date		123,000	No expiry date
Non-capital losses available for
future periods		7,597,000	2028 to 2042		7,103,000	2027 to 2041

Tax attributes are subject to review, and potential adjustment, by tax authorities.

14. SUBSEQUENT EVENTS

1. On December 3, 2022, 8,849,400 share purchase warrants exercisable at $0.12 expired

2. On December 27, 2022, The Company notified the vendors of the Castle West and Coyote Sinter Properties that it was terminating their option agreements with the Company.

3. On February 21, 2023, the Company closed a private placement, raising $200,000 through the issuance of 5,000,000 units at $0.04, each unit consisting of one common share and one-half common share purchase warrant, exercisable at $0.08 for 2 years.

4. In February 2023, the Company staked 162 unpatented mining claims known as the Nighthawk Property, in Esmeralda County, NV.

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