Blue River Resources Ltd. — Annual Report 2019

Feb 29, 2020

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CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED OCTOBER 31, 2019 AND 2018

(EXPRESSED IN CANADIAN DOLLARS)

BLUE RIVER RESOURCES LTD. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS October 31, 2019 (Expressed in Canadian Dollars)

CONTENTS	1
INDEPENDENT AUDITOR’S REPORT	2-3
FINANCIAL STATEMENTS
Consolidated Statements of Financial Position	4
Consolidated Statements of Comprehensive Loss	5
Consolidated Statements of Changes in Shareholders’ Deficiency	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	8-23

1

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INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Blue River Resources Ltd.

Opinion

We have audited the consolidated financial statements of Blue River Resources Ltd. (the “Company”), which comprise the consolidated statements of financial position as at October 31, 2019 and 2018, and the consolidated statements of comprehensive loss, changes in shareholders’ deficiency and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

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

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 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 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 is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 to the financial statements, which describes matters and conditions, that indicate the existence of a material uncertainty 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 comprises the information included in Management’s Discussion and Analysis.

Our opinion on the 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 financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. 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 Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the 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.

(cont’d…)

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Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the 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 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 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 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 financial statements, including the disclosures, and whether the 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 on the audit resulting in this independent auditor's report is Rakesh Patel.

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DALE MATHESON CARR-HILTON LABONTE LLP CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, Canada February 28, 2020

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3

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

	October 31,	October 31,
	2019	2018
	$	$
ASSETS
Current assets
Cash	-	195
Receivables	2,064	1,566
Prepaid expenses	884	2,104
Investment (Note 3)	26,361	25,123
	29,309	28,988
Equipment, net	890	1,065
Exploration and evaluation assets (Note 4)	-	7,220
Due from related parties (Note 13)	3,000	75,805
Reclamation bond (Note 5)	10,000	10,000
Investment in equity accounted investee (Note 6)	44,899	48,676
TOTAL ASSETS	88,098	171,754
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities
Bank indebtedness	2,429	-
Demand loan payable (Note 13)	17,496	15,216
Accounts payable and accrued liabilities (Note 7)	821,615	619,595
Due to related parties (Note 13)	543,111	384,324
Promissory note (Note 8)	43,348	40,348
	1,427,999	1,059,483
Shareholders' deficiency
Share capital (Note 9)	10,137,837	10,137,837
Reserves (Note 9)	152,770	161,070
Deficit	(11,630,508)	(11,186,636)
	(1,339,901)	(887,729)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY	88,098	171,754

Nature of Operations and Going Concern (Note 1) Subsequent Event (Note 16)

Approved and authorized on behalf of the Board:

“Griffin Jones” , Director “Nadwynn Sing” , Director

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

4

BLUE RIVER RESOURCES LTD. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Expressed in Canadian Dollars)

	For the years ended	October 31,
	2019	2018
	$	$
OPERATING EXPENSES
Consulting fees	204,000	364,847
Depreciation	175	216
Financing fees (Note 13)	8,180	5,320
Management fees (Note 13)	120,000	180,000
Office expenses	889	12,004
Professional fees	32,757	64,642
Regulatory and shareholder services	11,154	40,276
Rent	-	39,277
Travel and related	**- **	9,427
OPERATING LOSS	(377,155)	(716,009)
OTHER ITEMS
Impairment of investment (Note 3)	-	(3,123)
Impairment of exploration and evaluation assets, net (Note 4)	(2,214)	(15,741)
Impairment of related party loan (Note 13)	(70,211)	-
Loss on equity accounted investee (Note 6)	(3,777)	(1,324)
Gain (loss) on foreign exchange	(53)	4,132
	(76,255)	(16,056)
NET LOSS FOR THE YEAR	(453,410)	(732,065)
OTHER COMPREHENSIVE INCOME (LOSS)
Net change in fair value of investment, net of tax (Note 3)	1,238	(39,785)
Reclassification of impairment of investment	-	(1,203)
	1,238	(40,988)
COMPREHENSIVE LOSS FOR THE YEAR	(452,172)	(773,053)
BASIC AND DILUTED LOSS PER SHARE:
Loss per share for the year	$ (0.00)	$ (0.00)
WEIGHTED AVERAGE SHARES OUTSTANDING	191,751,470	182,710,374

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

5

BLUE RIVER RESOURCES LTD. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY (Expressed in Canadian Dollars)

	Common shares Number Amount Share subscriptions Warrants	Reserves Stock options Revaluation reserve Total Deficit Total
Balance at October 31, 2017 Shares issued in private placement Share issuance costs Forfeiture of warrants Subscriptions reclassified to payables Comprehensive loss for the year	$ $ $ 141,751,470 9,644,287 40,000 59,824 50,000,000 500,000 - - - (6,450) - - - - - (50,286) - - (40,000) - - - - -	$ $ $ $ $ 151,532 40,988 252,344 (10,504,857) (568,226) - - - - 500,000 - - - - (6,450) - - (50,286) 50,286 - - - - - (40,000) - (40,988) (40,988) (732,065) (773,053)
Balance at October 31, 2018 Forfeiture of warrants Comprehensive loss for the year	191,751,470 10,137,837 - 9,538 - - - (9,538) - - - -	151,532 - 161,070 (11,186,636) (887,729) - - (9,538) 9,538 - - 1,238 1,238 (453,410) (452,172)
Balance at October 31, 2019	191,751,470 10,137,837 - -	151,532 1,238 152,770 (11,630,508) (1,339,901)

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

6

BLUE RIVER RESOURCES LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in Canadian Dollars)

	For the years ended	For the years ended
	October 31,
	2019	2018
	$	$
OPERATING ACTIVITIES
Net loss for the year	(453,410)	(732,065)
Depreciation	175	216
Accrued interest	5,280	5,280
Impairment of investment	-	3,123
Impairment of exploration and evaluation assets	7,220	15,741
Impairment of related party loan	70,211	-
Loss (gain) on equity accounted investee	3,777	1,324
Unrealized foreign exchange gain	-	(3,806)
	(366,747)	(710,187)
Changes in non-cash working capital:
Receivables	(498)	665
Prepaid expenses	1,220	15,279
Accounts payable and accrued liabilities	202,020	132,553
CASH USED IN OPERATING ACTIVITIES	(164,005)	(561,690)
INVESTING ACTIVITIES
Exploration and evaluation asset expenditures	-	(23,304)
Acquisition of investment in equity accounted investee	-	(50,000)
CASH USED IN INVESTING ACTIVITIES	-	(73,304)
FINANCING ACTIVITIES
Shares issued for cash	-	500,000
Share issuance costs	-	(6,450)
Bank indebtedness	2,429	(5,279)
Net funds received from related parties	161,381	146,918
CASH RECEIVED FROM FINANCING ACTIVITIES	163,810	635,189
NET CHANGE IN CASH	(195)	195
CASH, BEGINNING OF YEAR	195	-
CASH, END OF YEAR	-	195

Supplemental Disclosure with Respect to Cash Flows (Note 14)

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

7

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN

Nature of operations

Blue River Resources Ltd. (the “Company”) was incorporated on September 26, 2008 under the Business Corporations Act (British Columbia) and the Company’s shares trade on the TSX Venture Exchange (“TSX-V”) under the symbol “BXR”. The Company is in the business of acquisition, exploration and development of mineral properties.

The head office and principal address of the Company are located at Suite 501 – 525 Seymour Street, Vancouver, B.C., V6B 3H7. The Company’s records office and registered address is Suite 700 – 401 West Georgia Street, Vancouver, B.C., V6B 5A1.

Going concern

The Company’s mineral properties are in the exploration stage and are without a known body of commercial ore. The business of exploring for minerals and mining involves a high degree of risk. Few properties that are explored are ultimately developed into producing mines. Major expenses may be required to establish ore reserves, to develop metallurgical processes, to acquire construction and operating permits and to construct mining and processing facilities. The amounts shown as exploration and evaluation assets represent acquisition, holding and deferred exploration costs and do not necessarily represent present or future recoverable values. The recoverability of the amounts shown for exploration and evaluation assets is dependent upon the Company obtaining the necessary financing to complete the exploration and development of the properties, the discovery of economically recoverable reserves and future profitable operations.

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 assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. As at October 31, 2019, the Company had a working capital deficit of $1,398,690 (October 31, 2018 – $1,030,495), had not advanced its properties to commercial production, and is not able to finance day to day activities through operations. The Company’s continuation as a going concern is dependent upon the successful results from its mineral property exploration activities and its ability to raise equity capital or borrowings sufficient to meet current and future obligations. These material uncertainties may cast significant doubt about the Company’s ability to continue as a going concern. Management intends to finance operating costs over the next twelve months with proceeds from the exercise of options and warrants, and further private placements.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue operations as a going concern.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

These consolidated financial statements, including comparatives, have been prepared in accordance 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”).

These financial statements were authorized by the audit committee and board of directors of the Company on February 28, 2020.

8

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

Statement of compliance – continued

The accounting policies applied in preparation of these consolidated financial statements are consistent with those applied and disclosed in the Company’s consolidated financial statements for the year ended October 31, 2018, except for the following:

Financial instruments

On November 1, 2018, the Company adopted IFRS 9 Financial Instruments which replaced IAS 39, Financial Instruments: Classification and Measurement . IFRS 9 provides a revised model for recognition and measurement of financial instruments and a single, forward-looking ‘expected loss’ impairment model. IFRS 9 also includes significant changes to hedge accounting. The standard is effective for annual periods beginning on or after January 1, 2018. The Company adopted the standard retrospectively. IFRS 9 did not impact the Company’s classification and measurement of financial assets and liabilities as the Company has elected under IFRS 9 to account for its available-for-sale investment through other comprehensive income.

The following summarizes the significant changes in IFRS 9 compared to the current standard:

• IFRS 9 uses a single approach to determine whether a financial asset is classified and measured at amortized cost or fair value. The classification and measurement of financial assets is based on the Company’s business models for managing its financial assets and whether the contractual cash flows represent solely payments for principal and interest. The change did not impact the carrying amounts of any of the Company’s financial assets on the transition date. Prior periods were not restated and no material changes resulted from adopting this new standard.

• The adoption of the new “expected credit loss” impairment model under IFRS 9, as opposed to an incurred credit loss model under IAS 39, had no impact on the carrying amounts of financial assets on the transition date given the Company transacts exclusively with large international financial institutions and other organizations with strong credit ratings and the investment in the available-for-sale financial asset is an investment in a publicly listed entity where the future cash flows from the investment equate to the entity’s share price.

Basis of presentation

These consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable and are presented in Canadian dollars unless otherwise noted.

Basis of consolidation

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Blue River Resources Inc., incorporated under the Laws of the State of Wyoming. All material intercompany balances and transactions have been eliminated upon consolidation.

Foreign currency translation

The functional currency of an entity is the currency of the primary economic environment in which the entity operates. The functional currency of the Company and its subsidiary 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 Canadian dollars are recorded at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the period end exchange rate 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 included in comprehensive loss.

9

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

Use of estimates and judgments

The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the period.

Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates.

The most significant accounts that require estimates and assumptions as the basis for determining the stated amounts include the recoverability of mineral properties, valuation of share-based compensation and other equity based payments and the recoverability and measurement of deferred tax assets and liabilities. Information about assumptions and estimation uncertainties that have a significant risk of resulting in material adjustments are as follows:

Valuation of share-based compensation

The Company uses the Black-Scholes Option Pricing Model for valuation of share-based compensation. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate, and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity reserves.

Income taxes

In assessing the probability of realizing income tax assets, management makes estimates related to expectation of future taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified.

Critical judgments exercised in apply accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements are as follows:

Determination of functional currency

The Company determines the functional currency through an analysis of several indicators such as expenses and cash flow, financing activities, retention of operating cash flows, and frequency of transactions with the reporting entity.

Economic recoverability and probability of future economic benefits of exploration and evaluation assets Management has determined that exploration, evaluation, and related costs incurred which were capitalized may have future economic benefits and may be economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefits including, geologic and other technical information, a history of conversion of mineral deposits with similar characteristics to its own properties to proven and probable mineral reserves, the quality and capacity of existing infrastructure facilities, evaluation of permitting and environmental issues and local support for the project.

Equipment

Equipment is recorded at cost less accumulated depreciation, which is calculated on a declining-balance basis as follows:

Office equipment 8% Furniture and fixtures 20% Computer hardware 55% / 100%

One-half the normal rate of depreciation is recorded in the year of acquisition.

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BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

Exploration and evaluation assets

Pre-exploration costs

Pre-exploration costs are expensed as incurred.

Exploration and evaluation expenditures

Costs directly related to the exploration and evaluation of mineral properties are capitalized once the legal rights to explore the mineral properties are acquired or obtained. When the technical and commercial viability of a mineral resource have been demonstrated and a development decision has been made, the capitalized costs of the related property are transferred to mining assets and depreciated using the units of production method on commencement of commercial production.

If it is determined that capitalized acquisition, exploration and evaluation costs are not recoverable, or the property is abandoned or management has determined an impairment in value, the property is written down to its recoverable amount. Exploration and evaluation assets are reviewed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount.

Restoration and environmental obligations

The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of long-term assets, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future restoration cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to exploration and evaluation assets along with a corresponding increase in the restoration provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The restoration asset will be depreciated on the same basis as other mining assets.

The Company’s estimates of restoration costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to the related asset with a corresponding entry to the restoration provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates.

Changes in the net present value, excluding changes in amount and timing of the Company’s estimates of reclamation costs, are charged to profit and loss for the year.

The Company currently has no significant restoration or environmental obligations

Impairment of long lived assets

The carrying amount of the Company’s long lived assets (which include equipment and exploration and evaluation assets) is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the statement of comprehensive loss.

The recoverable amount of assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.

Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.

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BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

Investments in associates (equity accounted investees)

Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20% and 50% of the voting power of another entity. In addition, significant influence may be achieved when the Company and other shareholders of the entity are under common control.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The financial statements include the Company’s share of the income and expenses and equity movements of associates, after adjustments to align the accounting policies with those of the Company, from the date that significant influence commences until the date that significant influence ceases. When the Company’s share of losses exceeds its interest in an associate, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the associate.

Share capital

Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company’s common shares, share warrants, options and flow-through shares are classified as equity instruments.

Incremental costs directly attributable to the issue of new shares or options are recognized as a deduction from equity, net of tax.

Valuation of equity units issued in private placements:

The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.

The fair value of the common shares issued in private placements was determined to be the more easily measurable component and were valued at their fair value, as determined by the closing price on the issuance date, the balance, if any, was allocated to the attached warrants. Any fair value attributed to the warrants is recorded to reserves.

Loss per share

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares outstanding during the reporting period. Diluted loss per share is computed similar to basic 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 the proceeds from such exercises were used to acquire common stock at the average market price during the reporting periods.

Share-based payments

The Company operates an employee stock option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the stock option reserve. Share-based payments to non-employees are measured on the date and at the fair value of goods or services received, or fair value of the equity instruments issued, whichever can be more 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.

The Company transfers the value of forfeited and expired unexercised vested stock options to deficit from reserves on the date of expiration.

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BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

Newly adopted accounting standards

The Company adopted all of the requirements of IFRS 9 Financial Instruments on November 1, 2018. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 utilizes a revised model for recognition and measurement of financial instruments in a single, forward-looking “expected loss” impairment model.

The following is the Company’s new accounting policy for financial instruments under IFRS 9:

(i) 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 income (loss) (“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 if the Company has opted to measure them at FVTPL.

The Company completed a detailed assessment of its financial assets and liabilities as at November 1, 2018. The following table shows the original classification under IAS 39 and the new classification under IFRS 9:

Financial assets/liabilities	Original Classification IAS 39	New Classification IFRS 9
Cash	FVTPL	FVTPL
Receivables	Amortized cost	Amortized cost
Accounts payable	Amortized cost	Amortized cost
Due to/from related party	Amortized cost	Amortized cost
Investments	Available for sale	FVTOCI

The adoption of IFRS 9 resulted in no impact to the opening accumulated deficit nor to the opening balance of accumulated comprehensive income on November 1, 2018.

(ii) Measurement

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.

Debt investments at FVTOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in Other Comprehensive Income (“OCI”). On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss

Equity investments at FVTOCI

These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

13

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

Newly adopted accounting standards - continued

(iii) 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.

(iv) 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.

Financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

Gains and losses on derecognition are generally recognized in profit or loss.

Income Taxes

Current income tax:

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the country where the Company operates and generates taxable income.

Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income tax:

Deferred income tax is provided using temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

14

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

Income Taxes - continued

Flow-through shares:

Resource expenditure deductions for income tax purposes related to exploratory activities funded by flow-through share arrangements are renounced to investors in accordance with income tax legislation. Pursuant to the terms of the flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates the proceeds received for flow-through shares 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. When the qualifying resource expenditures are renounced the Company derecognizes the liability and recognizes a deferred tax liability for the amount of tax reduction renounced to the shareholders. The premium is recognized as other income and the related deferred tax is recognized as a tax provision.

New and Future Accounting Pronouncements

The following pronouncements and amendments are effective for the Company’s annual periods beginning on or after November 1, 2019 unless otherwise stated. Adopting these standards is expected to have minimal or no impact on the consolidated financial statements.

• a. IFRS 16 – Leases: specifies how an IFRS reporter will recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17. The standard was issued in January 2016 and is effective for annual periods beginning on or after January 1, 2019. Management has determined that this standard will not have an effect on the Company’s consolidated financial statements as the Company does not have any leases.

• b. IFRIC 23 – Uncertainty Over Income Tax Treatments: clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. It is effective for annual periods beginning on or after January 1, 2019 with early adoption permitted. Management does not anticipate this standard having a material effect on the Company’s consolidated financial statements.

Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.

NOTE 3 – INVESTMENT

In March 2014, the Company closed an agreement with Global Resources Investment Ltd., an arm’s length party to the Company, pursuant to which the Company subscribed to 359,515 shares of Global Resources Investment Trust PLC (“GRIT shares”) at a subscription price of £1 per share. In consideration of the purchase of the GRIT shares, the Company issued to GRIT 10,000,000 common shares at a price of £0.0360 per share, which was the equivalent of $0.067 per share.

On acquisition, the GRIT shares were valued at $670,000. The GRIT shares have been designated as an investment and is recorded at fair value with the unrealized gains and losses being recognized in other comprehensive income (loss). Fair value is determined by reference to the closing market price at each reporting date. In November 2014, the Company sold 26,706 GRIT shares for net proceeds of £6,557 (or $11,846).

As at October 31, 2019, the remaining 332,809 (2018 – 332,809) GRIT shares had a fair value of $26,361 (2018 - $25,123) which resulted in a revaluation gain of $1,238 (2018 – loss of $39,785) to other comprehensive income and a realized loss of $NIL (2018 - $3,123) to the statement of loss.

15

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 4 – EXPLORATION AND EVALUATION ASSETS

		Mazama
	Castle Project	Copper Project
	(Canada)	(USA)	Total
	$	$	$
Balance, October 31, 2017	1	-	1
Acquisition costs	-	10,000	10,000
Deferred costs
Consulting – geological	7,219	5,741	12,960
Write off	-	(15,741)	(15,741)
Balance, October 31, 2018	7,220	-	7,220
Deferred costs
General exploration expenditures recovery	-	(5,006)	(5,006)
Recovery of costs	-	5,006	5,006
Impairment	(7,220)	-	(7,220)
Balance, October 31, 2019	-	-	-

Title to mineral properties

Title to mineral property interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyance history characteristic of many mineral property interests. The Company has investigated title to all of its mineral property interests and to the best of management’s knowledge, title to all of its properties are in good standing and free of material defect.

CASTLE PROJECT – British Columbia, Canada

The Castle Project was comprised of four mineral claim groups located in the Similkameen area of British Columbia: RATS Claim, Claimbank Claim, South Castle Claim, and Delorme claim. Certain of the claims are subject to a net smelter return royalty (“NSR”) on any ore production from the property. The Company continues to hold an interest in one claim.

As at October 31, 2017, the Castle Project was carried at a nominal carrying value of $1 as management did not have further plans to explore the property. Recent exploration activity in the area has renewed interest in the Princeton / Nicola area; as such, management commenced exploration on the project during the year ended October 31, 2018.

During the year ended October 31, 2019, the Company abandoned the property and recorded an impairment of $7,220.

MAZAMA COPPER PROJECT – Washington, USA

On February 25, 2013, as amended on February 25, 2015, the Company signed an option agreement to acquire a 100% beneficial right, title, and interest in and to a property located in Okanogan County, Washington State, USA. Certain terms of the agreement were amended on February 25, 2015 and February 16, 2017.

16

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 4 – EXPLORATION AND EVALUATION ASSETS – continued

MAZAMA COPPER PROJECT – Washington, USA

Under the terms of the amended option agreement, the Company will earn a 100% interest in the property subject to the following:

• The Company must pay a total of $260,000 cash as follows:

• $5,000 upon approval by the TSX-V (paid);

• $10,000 on or before July 30, 2013 (paid);

• $20,000 on or before August 19, 2013 (paid);

• $50,000 on or before June 20, 2014 (paid);

• $70,000 on or before September 30, 2015 (paid); and

• $105,000 on or before May 28, 2017 ($10,000 paid).

• The Company must issue a total of 6,000,000 common shares of the Company to the vendor:

• 500,000 common shares before July 20, 2013 (issued for a value of $42,500);

• 500,000 common shares every three months from February 25, 2013 for a total of 4,500,000 shares (2,000,000 common shares issued at a value of $160,000, 500,000 issued at a value of $32,500 and 2,000,000 common shares issued at a value of $90,000);

• 500,000 shares on or before July 30, 2016 (issued at a value of $22,500); and

• 500,000 shares on or before March 7, 2017 (issued for a value of $22,500).

Further to the terms of the amended option agreement, the Company agreed to incur minimum exploration and development expenses of $125,000 by June 20, 2014 (incurred); a further $150,000 by December 27, 2017 (incurred); and a further $175,000 by December 27, 2018.

The vendor retained a 3.0% NSR on any ore production from the property. The Company is eligible to purchase a 1% NSR at any time by making a cash payment of $1,000,000 and an additional 1% for $2,000,000.

In connection with the amended agreement dated February 16, 2017, the Company also entered into a Debt Settlement Agreement to settle $100,000 of the cash owed for 2,000,000 shares. The Company issued the shares to settle the obligations in June 2017.

As at October 31, 2017, the property had lapsed and as a result, the Company abandoned the option and recorded an impairment of $59,349. During the year ended October 31, 2018, the Company recorded an impairment of $15,741 relating to the payment of unpaid acquisition costs paid to the optionors and other expenses during the year. During the year ended October 31, 2019, the Company recorded a recovery of $5,006 relating to the refund of a deposit.

NOTE 5 – RECLAMATION BOND

As at October 31, 2019, the Company held a reclamation bond of $10,000 (2018 - $10,000) in connection with the Castle Project.

17

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 6 – INVESTMENT IN EQUITY ACCOUNTED INVESTEE

In July 2018, the Company entered into an Investment Agreement (the “Agreement”) with an arms’ length party, Global Satellite Integration Ltd. (“GSIL”), a private company incorporated under the laws of British Columbia, whereby the Company would acquire 30% of the voting shares of GSIL through the purchase of 42 units of GSIL for $50,000 with each unit consisting of 1 Class A common share and 1 Class C common share of GSIL. Under the Agreement, the Company has the right, but not the obligation, to participate in any future financings of GSIL to ensure the Company maintains its 30% ownership.

As at October 31, 2019, the Company had paid GSIL $50,000 (2018 - $50,000) for 42 (2018 – 42) units of GSIL representing 30% of the outstanding voting shares.

During the year ended October 31, 2018, the Company recorded a loss on the equity accounted investee of $1,324 which represented the Company’s portion of GSIL’s loss for the period from August 1, 2018 to October 31, 2018.

During the year ended October 31, 2019, the Company recorded a loss on the equity accounted investee of $3,777 which represented the Company’s portion of GSIL’s loss for the period; as a result, the carrying value of the investment as at October 31, 2019 was $44,899 (2018 - $48,676).

Summarized financial information in respect of GSIL is as follows:

	October 31, 2019 October 31, 2018
Current assets Non-current assets Total assets	$ $ 47,576 35,120 107,927 106,632
	155,503 141,752
Current liabilities Non-current liabilities Total liabilities	77,955 147,300 96,323 -
	174,278 147,300
Net and comprehensive loss for the period ended Company’s share of net and comprehensive loss	(12,591) (4,414) (3,777) (1,324)

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	October 31,	October 31,
	2019	2018
	$	$
Trade payables	778,467	576,947
Accrued liabilities	43,148	42,648
	821,615	619,595

NOTE 8 – PROMISSORY NOTE

In May 2015, the Company received a promissory note for $30,000 from an arm’s length lender which matured on May 21, 2017 and bears interest at 10% per annum, payable on maturity.

As at October 31, 2019, the loan remains outstanding and is now due on demand. The Company owes the lender $43,348 (2018 - $40,348) which includes $13,348 (2018 - $10,348) of accrued interest.

18

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 9 – SHARE CAPITAL

Authorized common shares

Unlimited common shares without par value.

Issued shares

The Company did not issue any shares during the year ended October 31, 2019.

During the year ended October 31, 2018 the Company closed a private placement by issuing 50,000,000 units at $0.01 per unit for total gross proceeds of $500,000. Each unit consists of one common share and one share purchase warrant with each warrant exercisable for $0.05 per share for a period of two years. No value was assigned to the warrants. In connection with this private placement the Company incurred share issue costs of $6,450.

During the year ended October 31, 2018 $40,000 previously received for share subscriptions were reclassified to payables as the funds will be repaid and no shares will be issued.

Stock options

The Company has an incentive stock options plan in place whereby, the maximum number of shares reserved for issue under the plan shall not exceed 10% of the issued and outstanding common shares of the Company from time to time. The maximum number of common shares reserved for issue to any individual director or officer under the plan cannot exceed 5% of the issued and outstanding number of common shares in any twelve-month period, the maximum number of common shares reserved for issue to all consultants cannot exceed 2% of the issued and outstanding number of common shares in any twelve-month period, and the maximum number of common shares reserved for issue to employees cannot exceed 2% of the issued and outstanding number of common shares in any twelve-month period. The exercise price of each option granted under the plan may not be less than the Discounted Market Price (as that term is defined in the policies of the TSXV). Options may be granted for a maximum term of ten years from the date of the grant, are non-transferable, and expire within 90 days of termination of employment or holding office as director or officer of the Company and, in the case of death, expire by the earlier of within one year thereafter or the expiry date of the option. Upon death, the options may be exercised by legal representation or designated beneficiaries of the holder of the option.

The Company did not have any stock option transactions during the years ended October 31, 2019 or 2018.

The following table summarizes the options outstanding and exercisable at October 31, 2019:

	Number
Exercise price	outstanding	Expiry date
$
0.05	2,150,000	May 9, 2021
0.05	200,000	June 16, 2021
0.05	800,000	July 18, 2021
0.05	1,700,000	August 17,2021
	4,850,000

The weighted average life of stock options outstanding at October 31, 2019 is 1.66 years.

19

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 9 – SHARE CAPITAL – continued

Warrants

A summary of share purchase warrant activities are as follows:

	Number of	Weighted average
	warrants	exercise price
		$
Balance, October 31, 2017	41,196,060	0.08
Issued	50,000,000	0.05
Forfeited	(17,693,039)	0.10
Balance, October 31, 2018	73,503,021	0.06
Forfeited	(23,503,021)	0.07
Balance, October 31, 2019	50,000,000	0.05

A summary of the share purchase warrants outstanding at October 31, 2019 is as follows:

Exercise	Number
price	outstanding	Expiry date
$
0.05	50,000,000*	January 5, 2020

*These share purchase warrants expired unexercised subsequent to the year ended.

The weighted average life of warrants outstanding at October 31, 2019 is 0.18 years.

NOTE 10 – FAIR VALUE OF FINANCIAL INSTRUMENTS

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 the Company’s receivables, accounts payables, due from and to related parties, demand loan and promissory note approximates their carrying values. The Company’s other financial instruments, being cash, reclamation bond, and investments are measured at fair value using Level 1 inputs.

NOTE 11 – FINANCIAL RISK AND CAPITAL MANAGEMENT

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:

a) Credit risk

• Credit risk is the risk of loss associated with a counter party’s inability to fulfill its payment obligations. The Company’s primary exposure to credit risk is on its cash accounts. Cash accounts are held with major banks in Canada. The Company has deposited its cash with two major banks from which management believes the risk of loss is low.

20

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 11 – FINANCIAL RISK AND CAPITAL MANAGEMENT – continued

b) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s ability to continue as a going concern is dependent on management’s ability to raise the required capital through future equity or debt issuances but there can be no assurance that such financing will be available on a timely basis under terms acceptable to the Company. The Company's approach to managing liquidity is to ensure that it will have sufficient liquidity to meet liabilities when they become due. As at October 31, 2019, the Company had a bank indebtedness balance of $2,429 and was required to settle liabilities of $1,425,570. Liquidity risk is assessed as high.

c) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

d) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. There is minimal interest rate risk as the Company’s interest bearing debts are not subject to floating interest rates.

e) Foreign currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s functional currency is the Canadian dollar and it has one property: the Castle Project, located in Canada. The Company is not exposed to foreign currency risk on its property.

The Company’s investment is trading on the London Stock Exchange in British pounds (£). Each 1% change in the Canadian dollar versus the British pound will result in a gain/loss of approximately $264. Additionally, for every £0.01 change in the price of GRIT shares, the Company will realize a £3,350 net change in fair value, before taxes, on its investment.

• f) Commodity Price risk

The ability of the Company to explore and develop its exploration and evaluation assets and the future profitability of the Company are directly related to the price of copper. The Company monitors copper prices to determine the appropriate course of action to be taken.

NOTE 12 – CAPITAL DISCLOSURE AND MANAGEMENT

The Company considers its cash and share capital as capital. The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the exploration of mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash. There was no change in the Company’s approach to capital management during the year ended October 31, 2019.

21

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 13 – RELATED PARTY TRANSACTIONS

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include the Company’s executive officers and Board of Director members.

Related party transactions are as follows:

• a) As at October 31, 2019, the Company owes certain officers, directors and related companies $543,111 (2018 - $384,324) for unpaid management fees and loans advanced to the Company.

• b) As at October 31, 2019, the Company advanced $NIL (2018 - $75,805) to a company with a common director. During the current year the Company impaired $70,211 (2018 - $NIL) which was advanced to the related Company.

• c) As at October 31, 2019, the Company advanced $3,000 (2018 - $nil) to a company of which the Company has significant control. (Note 6)

• d) As at October 31, 2019, the Company owes a shareholder who owns more than 10% of the Company’s outstanding shares $17,496 (2018 - $15,216) for the demand loan payable which includes interest of $7,996 (2018 - $5,716). The demand loan bears interest at 24% per annum and has no specific date of repayment.

Amounts due from and owing by the Company are unsecured, non-interest bearing and have no specified terms of repayment unless otherwise stated. The summary of related party transactions is as follows:

	For the years ended	For the years ended
	October 31,
	2019	2018
	$	$
Financing fees	2,280	2,280
Management fees	120,000	180,000

NOTE 14 – SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

The Company entered into certain non-cash transactions that have been excluded from the statements of cash flows as follows:

	For the years ended	For the years ended
	October 31,
	2019	2018
	$	$
Non-cash investing and financing activities:
Exploration and evaluation expenditures in accounts payable and accrued
liabilities	-	131,307
Value of expired warrants transferred to deficit	9,538	50,286
Value of share subscriptions reclassified topayable	-	40,000

22

BLUE RIVER RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended October 31, 2019 and 2018 (Expressed in Canadian Dollars)

NOTE 15 – DEFERRED INCOME TAXES

The actual income tax provisions differ from the expected amounts calculated by applying the corporate statutory income tax rates to the Company’s loss before income taxes. The components of these differences are as follows:

	2019	2018
	$	$
Loss before income taxes	453,410	732,065
Effective statutory rate	27.0%	27.0%
Expected tax recovery	(123,000)	(196,000)
Increase (decrease) resulting from:
Change in valuation allowance	53,000	260,000
Effect on share issue costs recognized	(4,000)	(1,000)
Unrecognized items for tax purposes	-	3,000
Difference in tax rates in foreign jurisdiction and others	74,000	(78,000)
Change in corporate tax rate	-	12,000
Income tax recovery	-	-
The Company’s tax-effected deferred income tax assets are made up as follows:
	2019	2018
	$	$
Deferred income tax assets:
Non-capital losses carried forward	1,911,000	1,856,000
Financing costs	6,000	10,000
Exploration and evaluation assets	536,000	534,000
Allowable capital losses	29,000	29,000
Others	1,000	1,000
	2,483,000	2,430,000
Less valuation allowance	(2,483,000)	(2,430,000)
	-	-

Due to the uncertainty of realization of these loss carry-forwards, the benefit is not reflected in the financial statements as the Company has provided a full valuation allowance for the future tax assets resulting from these items.

The Company has non-capital loss carry forwards of $7,076,810 which can be applied to reduce future taxable income in Canada expiring as follows:

Year of Expiry	$
2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038	1,192 252,589 500,134 542,333 696,109 952,199 785,109 463,900 1,033,056 962,810 887,379
	7,076,810

NOTE 16 – SUBSEQUENT EVENT

Subsequent to the year-end, 50,000,000 warrants with an exercise price of $0.05 per share expired unexercised.

23