Gold X Mining Corp. — Interim / Quarterly Report 2021

Feb 23, 2021

TERRENO RESOURCES CORP.

Financial Statements

(Expressed in Canadian Dollars)

For the nine months ended December 31, 2020 and 2019

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	Contents
Statements of Financial Position	3
Statements of Comprehensive loss	4
Statements of Shareholders Equity (Deficiency)	5
Statements of Cash Flows	6
Notes to the Financial Statements	7-17

NOTICE TO READER

The accompanying unaudited condensed interim financial statements of Terreno Resources Corp. (the "Company") have been prepared by and are the responsibility of management. The unaudited condensed interim financial statements have not been reviewed by the Company's auditors.

TERRENO RESOURCES CORP. Statements of Financial Position As at December 31, 2020 and March 31, 2020 (Expressed in Canadian Dollars)

Assets Current Cash Prepaid andreceivables	Notes March31,2020 December 31, 2020	Notes March31,2020 December 31, 2020
	(Unaudited) (Audited) $ 152,786 19,041 $ 5 35,678 516
	188,464 19,557
Total Assets	$ 188,464 19,557 $
Liabilities and Shareholders' equity Current liabilities Accounts payable and accrued liabilities Shareholders' equity Share capital Warrant reserve Share option reserve Deficit	6 & 7 $ 110,394 172,656 $ 110,394 172,656 8 9,222,446 8,896,046 9 2,615,438 2,481,838 8 3,000,543 2,916,643 (14,760,357) (14,447,626) 78,070 (153,099)
		110,394 172,656
		9,222,446 8,896,046 2,615,438 2,481,838 3,000,543 2,916,643 (14,760,357) (14,447,626)
		78,070 (153,099)
Total Liabilities and Shareholders' equity	$ 188,464 19,557 $

Refer to Note 2 for the Significant Going Concern Uncertainty Refer to Note 16 for Subsequent Events

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

Approved on behalf of the Board

Director

George A. Brown Joseph Del Campo

Director

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TERRENO RESOURCES CORP.

Statements of Comprehensive Loss For the nine months ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

TERRENO RESOURCES CORP. Statements of Comprehensive Loss For the nine months ended December 31, 2020 and 2019 (Expressed inCanadian Dollars)
Operating expenses General and administrative expenses Explorationand evaluationexpenditures	Three months ended December 31, Nine months ended December 31,
	Notes 2020 2019 2020 2019
	9 126,072 $ 26,269 192,938 82,774 10 65,365 6,259 119,793 81,445
Loss from operations Foreign exchange (loss) gain Income taxexpense	(191,437) (32,528) (312,731) (164,219) - - - 769 - - - (36,729)
Net loss for the period	(191,437) $ (32,528) (312,731) (200,179)
Total comprehensive loss for theperiod	(191,437) $ (32,528) (312,731) (200,179)
Loss per share Basic and diluted Weighted average number of common shares outstanding Basic and diluted	(0.00) (0.00) (0.01) (0.01) 46,161,506 34,235,506 40,972,859 33,114,779

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

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TERRENO RESOURCES CORP.

Statements of Shareholders' Equity (Deficiency) For the nine months ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

	Share capital Warrant reserve Share option reserve Deficit Total Shareholders' equity (deficiency)
Balance as at March 31, 2020 Net loss for the period Total comprehensive loss for the period Issuance of Common shares and warrants on a private placement, net Stock based compensation	8,896,046 $ 2,481,838 $ 2,916,643 $ (14,447,626) $ (153,099) $
	- - - (312,731) (312,731)
	- - - (312,731) (312,731)
	326,400 133,600 - - 460,000 - - 83,900 - 83,900
	326,400 133,600 83,900 - 543,900
Balance as at December 31, 2020	9,222,446 $ 2,615,438 $ 3,000,543 $ (14,760,357) $ 78,070 $
Balance as at March 31, 2019 Net loss for the period Total comprehensive loss for the period Issuance of common shares and warrants in a private placement Options expired	8,629,036 $ 2,413,848 $ 2,916,643 $ (14,078,980) $ (119,453) $
	- - - (200,179) (200,179)
	- - - (200,179) (200,179)
	160,500 69,500 - - 230,000 - - (4,360) 4,360 -
	160,500 69,500 (4,360) 4,360 230,000
Balance as at December 31, 2019	8,789,536 $ 2,483,348 $ 2,912,283 $ (14,274,799) $ (89,632) $

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

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TERRENO RESOURCES CORP. Statements of Cash Flows For the nine months ended December 31, 2020 and 2019 (Expressed in Canadian Dollars)

Cash flows from operations Net loss for the period Items not affecting cash: Stock based compensation Unrealized foreign exchange Changes in non-cash working capital balances Net cash used in operating activities Financing activites Issuance of shares and warrants on private placement basis Cash provided by financing activities Increase in cash Cash, beginning of period Cash, end ofperiod	Notes	December 31, 2020 December 31, 2019 Nine months ended
	15 8	(312,731) $ (200,179) $ 83,900 - - (769)
		(228,831) (200,948) (97,424) (24,988)
		(326,255) (225,936)
		460,000 230,000
		460,000 230,000
		133,745 4,064 19,041 17,838
		152,786 $ 21,902 $

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

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TERRENO RESOURCES CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (UNAUDITED) (EXPRESSED IN CANADIAN DOLLARS)

1. Description of Business and Nature of Operations:

Terreno Resources Corp. (the “Company” or “Terreno”) is a listed issuer on the TSX Venture Exchange trading on the NEX board. It was incorporated under the Alberta Business Corporations Act on April 18, 1995 and continued into the Province of British Columbia on November 21, 2007. The Company’s registered office is located at Suite 1102, 44 Victoria Street, Toronto, Ontario M5C 1Y2.

The Company is focused on acquisition, exploration and development of mineral properties.

In January 2018, Terreno signed a definitive property option agreement with an Ontario private company under which Terreno may earn a sixty percent (60%) interest in the Las Cucharas Gold & Silver Project in Mexico. The Las Cucharas Project consists of seventeen (17) concessions covering slightly over four thousand four hundred forty-five (4,445) hectares.

The unaudited condensed interim financial statements (“interim financial statements”) as at and for the nine months ended December 31, 2020 and 2019 were approved by the Board of Directors on February 23, 2021.

2. Significant going concern uncertainty:

These interim financial statements have been prepared on a going concern basis which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. The Company has a history of operating losses and as at December 31, 2020 has an accumulated deficit, of $14,760,357 (March 31, 2020 - $14,447,626).

These risks include, but are not limited to, dependence on key individuals, and the ability to secure adequate financing to meet the minimum capital required to successfully continue as a going concern.

In the event that future financings are not successfully completed, the Company may not have sufficient cash and cash flow to meet its operating requirements. The ability of the Company to continue as a going concern is dependent on securing additional financings through issuing additional equity or debt instruments. While the Company believes in the viability of its strategy and, in its ability to raise additional funds for the Company to continue as a going concern, there can be no assurances to that effect. These material uncertainties may cast significant doubt upon the Company’s ability to continue as a going concern.

These interim financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Such adjustments, if required, could be material to the financial statements.

COVID-19

The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries.

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TERRENO RESOURCES CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (UNAUDITED) (EXPRESSED IN CANADIAN DOLLARS)

2. Significant going concern uncertainty (continued):

In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations. The Company would be adversely affected by the loss of services of key personnel and restrictions on cross border trade.

3. Basis of preparation:

(a) Statement of Compliance:

These interim financial statements, including comparative balances, have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and IFRS Interpretations Committee (IFRIC) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting.

These interim financial statements do not include all the information required for full annual financial statements and they should be read in conjunction with the audited annual consolidated financial statements for the year ended March 31, 2020 and the notes to the financial statements.

(b) Basis of Presentation:

These interim financial statements have been prepared using the historical cost basis, except for certain financial instruments which have been measured at fair value. All monetary references expressed in these notes are references to Canadian dollar amounts (“$”) except as otherwise noted.

(c) Critical accounting judgments, estimates and assumptions:

The preparation of these interim financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the interim financial statements and reported amounts of expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these judgments, estimates and assumptions could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods. Below is a list of the critical accounting judgements, estimates and assumptions

i. Determination of functional currency:

The functional currency of each of the Company’s entities is measured using the currency of the primary economic environment in which that entity operates.

The functional currency for the Company is the Canadian Dollar.

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TERRENO RESOURCES CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (UNAUDITED) (EXPRESSED IN CANADIAN DOLLARS)

3. Basis of preparation (continued):

• ii. Deferred tax assets:

The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on the Company’s future planned activities as supported by budgets that have been approved by the Board of Directors. Management also considers the tax rules of the various jurisdictions in which the Company operates. Should there not be a forecast of taxable income that indicates the probable utilization of a deferred tax asset or any portion thereof, the Company does not recognize the deferred tax asset.

• iii. Share-based payments:

The Company uses the Black-Scholes option pricing model to calculate stock-based compensation expense and warrant values. The Black-Scholes model requires seven key inputs to determine a value for an option: risk free interest rate, exercise price, market price at date of issue, expected dividend yield, expected life, forfeiture rate and expected volatility. Certain of the inputs are estimates which involve considerable judgment and are, or could be, affected by significant factors that are out of the Company’s control.

4. Recent accounting pronouncements:

New standards adopted:

IFRS 16 - Leases - In January 2016, the International Accounting Standards Board (IASB) issued a new International Financial Reporting Standard (IFRS) on lease accounting which was incorporated into Part I of the CPA Canada Handbook – Accounting by the Accounting Standards Board (AcSB) in June 2016. IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 introduces a single lessee accounting model that requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Lease assets and liabilities are initially recognized on a present value basis and subsequently, similarly to other non-financial assets and financial liabilities, respectively. The lessor accounting requirements are substantially unchanged and, accordingly, continue to require classification and measurement as either operating or finance leases. The new standard also introduces detailed disclosure requirements for both the lessee and lessor. The new standard is effective for annual periods beginning on or after January 1, 2019. Earlier application was permitted for entities that also apply IFRS 15 Revenue from Contracts with Customers.

The Company’s adoption of IFRS 16 did not have a material financial impact upon the financial statements as they are not a party to any leases under the scope of the standard.

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TERRENO RESOURCES CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (UNAUDITED) (EXPRESSED IN CANADIAN DOLLARS)

5. Prepaids and receivables:

The Company’s prepaid expenses and other receivables consisted of the following:

	December	31,	March 31,
	2020		2020
	$		$
Prepaid expenses	35,378		216
MiscellaneousReceivable		300	300
Total	35,678		516

6. Accounts payable and accrued liabilities:

	December 31,	March 31,
	2020	2020
	$	$
Trade payables	28,895	41,922
Accruedliabilities (i)	81,500	130,734
Total	110,394	172,656

• (i) Accounts payable and accrued liabilities includes $29,898 (March 31, 2020 - $70,321) payable to three officers of the Company for unpaid remuneration. (Refer to note 7).

7. Related party transactions with key management personnel:

All transactions with key management personnel have occurred in the normal course of operations and are recorded at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company. The remuneration of key executives is determined by the board having regard to the performance of individuals and market trends.

During the nine months ended December 31, 2020 and 2019 the Company entered into the following transactions with key management personnel:

Type of service	Nature of relationship	2020	2019
		$	$
Consultingfees	Officers	76,710	83,940

For the nine months ended December 31, 2020, $63,000 (2019 - $63,000) of the cost relating to the consulting fees are included in general and administration expenses and $13,710 (2019 - $20,940) is included in exploration and evaluation expenditures.

At December 31, 2020, accounts payable and accrued liabilities included $29,898 (March 31, 2020 - $70,321) due to key management personnel for unpaid remuneration.

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TERRENO RESOURCES CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (UNAUDITED) (EXPRESSED IN CANADIAN DOLLARS)

8. Share capital:

Authorized :

The Company is authorized to issue an unlimited number of voting common shares without par value.

Issued :

Share capital:

	Shares	Amount
	#	$
Balance at March 31, 2019	29,635,506	8,629,036
Private placement	4,600,000	160,500
Exercise of warrants	100,000	6,510
Property acquisition	2,500,000	100,000
Balance at March 31, 2020	36,835,506	8,896,046
Private placement	9,326,000	326,400
Balance at December 31, 2020	46,161,506	9,222,446

• (i) In June 2019, the Company completed a non-brokered private placement of 4,600,000 units at a price of $0.05 per unit. Each unit consisted of a common share and one share purchase warrant. The share purchase warrants are exercisable at $0.05 and expire one year from the closing date of June 6, 2019. A senior officer and director of the Company subscribed for 1,200,000 units under the financing. The $60,000 subscription price was netted against the payables due to the officer and director. An officer of the Company subscribed for 480,000 units under the financing. The $24,000 subscription price was netted against the payables due to the officer.

• (ii) In February 2020, the Company issued 2,500,000 shares (at a fair value of $100,000) due on the second anniversary of the property option agreement for the Las Cucharas Gold & Silver Project. See note 11.

• (iii) In March 2020, the Company received $5,000 for 100,000 warrants exercised at $0.05 per common share. The exercised share purchase warrants were previously estimated using the Black-Scholes option pricing model to have a fair value of $1,510.

• (iv) In September 2020, the Company completed a private placement of 9,200,000 units at a price of $0.05 per unit. Each unit consisted of a common share and one share purchase warrant. The share purchase warrants are exercisable at $0.07 and expire one year from the closing date of September 1, 2020. A senior officer and director of the Company subscribed for 1,500,000 units under the financing. The $75,000 subscription price was netted against the payables due to the officer and director. An additional 324,039 units was subscribed by two directors of the Company and 480,000 units were subscribed by an officer. The Company issued 126,000 common shares and 126,000 non transferable warrants exercisable at $0.07 for a period of 12 months as finders’ fees.

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TERRENO RESOURCES CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (UNAUDITED) (EXPRESSED IN CANADIAN DOLLARS)

8. Share capital (continued):

Stock Option plan:

The Company grants incentive stock options to eligible directors, officers, and consultants as permitted pursuant to the Company’s Stock Option Plan approved by the shareholders. The aggregate number of common shares which may be subject to option at any one time may not exceed 10% of the issued common shares of the Company as of that date. Each of the stock options granted vest immediately on the date of grant and have a term of five years. If the option holder ceases to be qualified to receive options from the Company those options expire in 90 days.

a) Stock options:

A summary of the status of the Company’s stock options outstanding as at December 31, 2020, and changes during the periods then ended is presented below:

	Number of options	Weighted average exercise price
		$
Balance at March 31, 2019	1,000,000	0.06
Expired	(100,000)	0.05
Balance at March 31, 2020	900,000	0.06
Expired	(250,000)	0.05
Granted	2,800,000	0.05
Balance at December 31, 2020	3,450,000	0.05

In December 2020, the Company granted 2,800,000 options to seven officers and directors of the Company. The options were exercisable at a price of $0.05 for a period of three years expiring on December 31, 2023.

All options vested immediately on the date of grant.

The grant date fair value of the stock options granted was $0.03 per option using the BlackScholes option pricing model.

For the purpose of the calculation, the following assumptions were used: share price $0.04; risk free interest rate 0.23%; expected dividend yield 0%; expected volatility 140%; and expected life 3 years.

Volatility was estimated based on the historical volatility of the Company for the same time frame as the expected contractual life of the stock options.

During the nine months ended December 31, 2020, 250,000 stock options exercisable at $0.05 expired unexercised.

As at December 31, 2020, the Company has 3,450,000 stock options vested and outstanding. The options have a weighted average remaining life of 2.55 years.

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TERRENO RESOURCES CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (UNAUDITED) (EXPRESSED IN CANADIAN DOLLARS)

8. Share capital (continued):

Details of outstanding options:

Outstanding	Exercise price	Number of	Expiry date
options		vested options
400,000*	$0.075	400,000	January 29, 2021
250,000	$0.05	250,000	May 31, 2022
2,800,000	$0.05	2,800,000	December 31, 2023
3,450,000		3,450,000

*See Note 16

These stock options are expensed over the options’ vesting periods in the statements of comprehensive loss and credited to share option reserve.

9. Warrant reserve:

A summary of the status of the Company’s warrants as at December 31, 2020 and 2019, and the changes during the periods then ended is presented below:

	Number of warrants	Weighted average exercise price
		$
Balance at March 31, 2019	4,600,000	0.05
Exercised	(100,000)	0.05
Balance at March 31, 2020	4,500,000	0.05
Issued	9,326,000	0.07
Expired	(4,500,000)	(0.05)
Balance at December 31, 2020	9,326,000	0.07

On June 6, 2019 the Company completed a non-brokered private placement of 4,600,000 units at a price of $0.05 per unit. Each unit was comprised of one common share and one share purchase warrant. Each full purchase warrant entitled the holder to acquire one additional common share for a period of one year at a price of $0.05. The fair value of the share purchase warrants was estimated at $69,500 using the Black-Scholes option pricing model with the assumptions as presented below.

On September 1, 2020 the Company completed a non-brokered private placement of 9,200,000 units at a price of $0.05 per unit. Each unit was comprised of one common share and one share purchase warrant. Each full purchase warrant entitles the holder to acquire one additional common share for a period of one year at a price of $0.07. The fair value of the share purchase warrants was estimated at $133,600 using the Black-Scholes option pricing model with the assumptions as presented below.

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TERRENO RESOURCES CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (UNAUDITED) (EXPRESSED IN CANADIAN DOLLARS)

9. Warrant reserve (continued):

Valuation assumptions for warrants issued:

Black-Scholes assumptions used	Warrants issued June 6, 2019	Warrants issued September 1, 2020
Expected volatility	140%	140%
Expected dividend yield	0%	0%
Risk-free interest rate	1.44%	0.26%
Expected life of warrants	1 year	1 year
Share price on date of issue	$0.035	$0.045

In March 2020, the Company received $5,000 for 100,000 warrants exercised.

In June 2020, 4,500,000 warrants expired unexercised.

10. General and Administrative expenses:

	Nine months ended December 31, Three months ended December 31,
Professional fees Consulting fees Shareholder relations and communications Office and general Stockbased compensation	2020 2019 2020 2019
	$ $ $ $ 3,500 3,250 10,445 10,590 21,000 21,000 63,000 63,000 2,525 1,924 9,353 8,847 15,147 95 26,241 337 83,900 - 83,900 -
	126,072 26,269 192,938 82,774

11. Exploration and evaluation expenditures:

In January 2018, Terreno signed a definitive property option agreement with an Ontario private company under which Terreno may earn a sixty percent (60%) interest in the Las Cucharas Gold & Silver Project in Mexico.

The Las Cucharas Project consists of seventeen (17) concessions covering slightly over four thousand four hundred forty-five (4,445) hectares. Terreno may earn a sixty percent interest by incurring exploration expenditures and by issuing Terreno common shares as follows:

• Two million common shares within 10 days of TSX Venture Exchange acceptance of the property acquisition (issued).

• Two and a half million common shares on each of the first and second anniversary of the option agreement (issued). See note 8.

• Three million common shares on the third anniversary of the option agreement. See note 16.

• Five million shares on the fourth anniversary of the option agreement within five (5) days of the transfer of a sixty percent (60%) interest in the concession titles.

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TERRENO RESOURCES CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (UNAUDITED) (EXPRESSED IN CANADIAN DOLLARS)

11. Exploration and evaluation expenditures:

• Cumulative exploration expenditures of $700,000 by October 31, 2021 including $200,000 by October 31, 2019 (completed) and $450,000 by October 31, 2020 (completed).

• The property option, once earned and exercised, will make the Las Cucharas Project subject to a three percent (3%) net smelter return (NSR) royalty payable to Maverix Metals Inc. (TSX: MMX).

As at December 31, 2020, Terreno has incurred exploration and evaluation expenditures of $980,099. This includes 7,000,000 common shares for a consideration of $300,000 issued under the option agreement which was approved by the TSX Venture Exchange. See note 8.

12. Capital management:

The Company includes the following in its capital:

	December 31,	March 31,
	2020	2020
	$	$
Share capital	9,222,446	8,896,046
Warrants	2,615,438	2,481,838
Share option reserve	3,000,543	2,916,643
Deficit	(14,760,357)	(14,447,626)
	78,070	(153,099)

The Company’s objectives when managing capital are:

• (a) To maximize any income it may receive from available cash without significantly increasing the principal at risk by making investments in high credit quality issuers; and

• (b) To maintain a flexible capital structure which optimizes the cost of capital at acceptable levels of risk.

The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its underlying assets. The Company maintains or adjusts its capital level to enable it to meet its objectives by:

• realizing proceeds from the disposition of its investments;

• raising capital through equity financings;

The Company is not subject to any capital requirements imposed by a regulator. To date, the Company has not declared any cash dividends to its shareholders. The Company’s management is responsible for the management of capital and reviews its capital management approach on an ongoing basis through the preparation of annual expenditure budgets, which are updated regularly to take into account factors such as successful financings to fund activities, changes in property holdings and related obligations and exploration activities and believes that this approach, given the relative size of the Company, is reasonable.

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TERRENO RESOURCES CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (UNAUDITED) (EXPRESSED IN CANADIAN DOLLARS)

13. Financial instruments:

These assets represent a small portion of the Company’s overall business. However, the use of financial instruments can expose the Company to several risks. A discussion of the Company’s use of financial instruments and their associated risks is provided below:

• (a) Liquidity risk: Liquidity risk is the risk that the Company will have sufficient cash resources to meet its financial obligations as they come due. As at December 31, 2020, the Company has outstanding liabilities of $110,394 (March 31, 2020 - $172,656) and a working capital of $78,070 (March 31, 2020 – deficit of $153,099). The Company’s liquidity and operating results may be adversely affected if the Company’s access to the capital market is hindered, whether as a result of downturn in stock market conditions generally or related to matters specific to the Company.

The Company generates cash flow primarily from its financing activities. The Company has cash of $152,786. The Company will need to obtain additional financing. There is no assurance that financing will be available from any source, that it will be available on terms acceptable to the Company, or that any future offering of securities will be successful. If additional funds are raised through the issuance of equity securities, there may be a significant dilution in the value of the Company’s outstanding common stock. The Company could suffer adverse consequences if it is unable to obtain additional capital which would cast substantial doubt on its ability to continue its operations and growth. See note 2.

• (b) Currency risk: Currency risk is the risk that the fair value of, or future cash flows from, the Company’s financial instruments will fluctuate because of changes in foreign exchange rates. The Company is exposed to currency fluctuations as some amount of its liabilities are denominated in U.S. dollars. The Company has not entered into any foreign currency contracts to hedge this exposure. The risk is not significant for the current financial reporting period.

• (c) Credit risk: Credit risk is the risk of loss associated with a counter-party’s inability to fulfill its payment obligations. The Company’s credit risk is minimal as it has its cash deposited with highly rated financial institutions.

14. Commitments and obligations:

The Las Cucharas Gold & Silver Project in Mexico has a commitment and obligation of cumulative exploration cash expenditures remaining of $19,901 by October 31, 2021. The $200,000 commitment required by October 31, 2019 and the $450,000 commitment required by October 31, 2020 have been surpassed. See Note 16.

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TERRENO RESOURCES CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019 (UNAUDITED) (EXPRESSED IN CANADIAN DOLLARS)

15. Changes in non-working capital:

	Forthenine	months ended
	December 31,	December 31,
	2020	2019
	$	$
Prepaid and receivables	(35,162)	(2,856)
Accounts payable and accruedliabilities	(62,262)	(22,132)
Total	(97,424)	(24,988)

16. Subsequent events:

In January 2021, 400,000 stock options exercisable at $0.075 expired unexercised.

In February 2021, the Company issued 3,000,000 shares valued at $120,000 due on the third anniversary under the Las Cucharas property option agreement.

In February 2021, the Company announced completion of the $700,000 of exploration expenditures required to earn the 60% interest in the Las Cucharas Gold and Silver Project.

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