Greenhawk Resources Inc. — Interim / Quarterly Report 2021

Aug 3, 2021

GREENHAWK RESOURCES INC. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED JUNE 30, 2021

(EXPRESSED IN CANADIAN DOLLARS) (UNAUDITED)

Notice To Reader

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

Greenhawk Resources Inc.

Condensed Consolidated Interim Statements of Financial Position (Expressed in Canadian Dollars) Unaudited

		As at		As at
		June 30,	December 31,
		2021		2020
ASSETS
Current assets
Cash	$	6,158,420	$	7,677,172
Prepaid expenses and deposits (note 3)		35,599		54,582
Sales tax receivable		254,237		127,941
Total current assets		6,448,256		7,859,695
Non-current assets
Prepaid expenses and deposits (note 3)		15,996		15,996
Right-of-use asset (note 5)		155,888		191,862
Equipment(note 6)		-		39,291
Total non-current assets		171,884		247,149
Total assets	$	6,620,140	$	8,106,844
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities (note 14)	$	44,675	$	162,772
Lease obligation(note 7)		77,131		115,172
Total current liabilities		121,806		277,944
Non-current liabilities
Lease obligation(note 7)		-		21,013
Total non-current liabilities		-		21,013
Total liabilities		121,806		298,957
Shareholders' equity
Share capital (note 9)		97,462,709		88,438,709
Contributed surplus		15,456,244		14,312,982
Deficit		(106,420,619)		(94,943,804)
Total shareholders' equity		6,498,334		7,807,887
Total liabilities and shareholders' equity	$	6,620,140	$	8,106,844

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

Nature of Operations (note 1)

Approved on behalf of the Board:

"Greg McKenzie " Director (Signed) "Tom English" Director (Signed)

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Greenhawk Resources Inc.

Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss) (Expressed in Canadian Dollars) Unaudited

	Three months	Three months	Three months	Three months		Six months	Six months	Six months
		ended		ended		ended		ended
		June 30,		June 30,		June 30,		June 30,
		2021		2020		2021		2020
Expenses
Exploration and evaluation
expenditures (note 12)	$	9,274,000	$	-	$	9,274,000	$	-
General and administrative (note 13)		552,324		674,478		906,841		1,327,501
Stock-based compensation		952,313		22,998		1,143,262		45,997
Acquisition related costs		-		196,534		115,956		292,402
		10,778,637		894,010		11,440,059		1,665,900
Other income (loss)
Interest income (expense)		(2,440)		388,628		(288)		(1,575,475)
Loss on sale of subsidiary (note 4)		-		(391,799)		-		(391,799)
Gain on extinguishment of convertible debenture		-		24,775,610		-		24,775,610
Loss on disposal of equipment		(31,707)		-		(36,006)		-
Foreign exchange loss		(462)		-		(462)		(192)
Net (loss) income and comprehensive (loss) income
before income tax and continuing operations		(10,813,246)		23,878,429		(11,476,815)		21,142,244
Income from discontinued operations(note 4)		-		73,816		-		619,147
Net (loss) income and comprehensive (loss)
income for theperiod	$(10,813,246)		$	23,952,245	$(11,476,815)		$	21,761,391
Income (loss) per share from continuing operations
- basic and diluted (note 11)	$	(0.17)	$	1.88	$	(0.21)	$	1.66
Income (loss) per share
- basic and diluted (note 11)	$	(0.17)	$	1.88	$	(0.21)	$	1.71
Weighted average number of shares outstanding
- basic and diluted(note 11)		62,049,569		12,719,171		55,435,526		12,719,171

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

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Greenhawk Resources Inc.

Condensed Consolidated Interim Statements of Cash Flows (Expressed in Canadian Dollars) Unaudited

		Six months	Six months
		ended	ended
		June 30,	June 30,
		2021	2020
Operating activities
Net loss for the period	$(11,476,815)		$ 21,761,391
Adjustments for:
Acquisition of Copenhagen Minerals Inc. (note 8)		9,024,000	-
Mining revenue		-	(3,102,562)
Depreciation		39,258	32,764
Fair gain on re-measurement of digital assets		-	(79,916)
Gain on extinguishment of convertible debenture		-	(24,775,610)
Loss on disposal of equipment		36,006	79,686
Loss on sale of subsidiary		-	391,799
Foreign exchange loss		-	191
Sock-based compensation		1,143,262	45,997
Interest expense (income), net		6,910	743,957
Interest accretion		-	1,010,141
Changes in non-cash working capital items:
Prepaids		18,983	69,505
Sales tax receivable		(126,295)	1,543,745
Digital assets		-	3,308,798
Accounts payable and accrued liabilities		(118,097)	373,320
Securitydeposit		-	(304,044)
Net cash(used in) provided by operating activities		(1,452,788)	1,099,162
Investing activities
Proceeds from sale of subsidiary		-	1,734,315
Return ofproceeds from sale of equipment		-	(79,686)
Net cashprovided by investing activities		-	1,654,629
Financing activities
Lease liability payments		(65,964)	(521,595)
Net cash used in financing activities		(65,964)	(521,595)
Net change in cash		(1,518,752)	2,232,196
Cash, beginning of period		7,677,172	878,387
Cash included in assets held for sale		-	(28,937)
Cash, end ofperiod	$	6,158,420	$ 3,081,646

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

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Greenhawk Resources Inc.

Condensed Consolidated Interim Statements of Changes in Shareholders' Equity (Expressed in Canadian Dollars) Unaudited

	Share			Contributed
	Capital		Warrants	Surplus		Deficit	Total
Balance, December 31, 2019	$ 79,675,709	$	1,606,933	**$ 12,397,790 **	**$ **	(116,946,158)$(23,265,726)
Expiry of warrants	-		(1,606,933)	1,606,933		-	-
Issuance of common shares in connection with
conversion of Convertible Debenture	8,763,000		-	-		-	8,763,000
Stock-based compensation	-		-	45,998		-	45,998
Net income and comprehensive income for theperiod	-		-	-		21,761,391	21,761,391
Balance, June 30, 2020	$ 88,438,709	$	-	**$ 14,050,721 **	$	(95,184,767)$	7,304,663
Balance, December 31, 2020	$ 88,438,709	$	-	$ 14,312,982	$(94,943,804) $		7,807,887
Acquisition of Copenhagen Minerals Inc. (note 8)	9,024,000		-	-		-	9,024,000
Stock-based compensation	-		-	1,143,262		-	1,143,262
Net loss and comprehensive loss for theperiod	-		-	-		(11,476,815)	(11,476,815)
Balance, June 30, 2021	$ 97,462,709	$	-	**$ 15,456,244 **	**$ **	(106,420,619)$	6,498,334

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

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Notes to Condensed Consolidated Interim Financial Statements Three and Six Months Ended June 30, 2021 (Expressed in Canadian Dollars) Unaudited

Greenhawk Resources Inc.

1. Nature of Operations

Greenhawk Resources Inc (formerly Cryptologic Corp.) (the "Company" or "Greenhawk"), mineral exploration mining company who has activities in Greenland.

The head office and registered record office is located at 22 Adelaide Street West, Suite 2020, Toronto, Ontario, M5H 4E3.

On April 8, 2020, the Company sold all of the shares of its wholly-owned subsidiary 9376-9974 Quebec Inc., (“9376”), which was engaged in cryptocurrency mining operations located in Lachute, Quebec. See note 4.

On June 30, 2020, convertible debentures with a principal balance of $34,500,000 and accrued interest of $1,380,000 were converted into 35,879,991 shares of the Company.

On August 7, 2020, the Company (i) terminated the lease of its wholly-owned subsidiary, Crypto 205 Inc., at its cryptocurrency mining facility in Pointe-Claire, Quebec, effective July 31, 2020, and (ii) terminated the employment contracts of all of its employees.

On May 28, 2021, the Company closed the share purchase agreement with Greenland Resources Inc. acquiring 100% of the outstanding shares of the wholly-owned subsidiary, Copenhagen Minerals Inc. (“Copenhagen”), which owns a 100% interest in a mineral exploration license known as the Storø Gold Project, located in Greenland. Consideration for the transaction was satisfied through the payment of $250,000 cash and the issuance 37,600,000 common shares of the Company at a deemed issue price of $0.24 per share.

The recent outbreak of the coronavirus, also known as “COVID-19,” has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus continue to rapidly evolve and government authorities have implemented emergency measures to mitigate the spread of the virus. The outbreak and the related mitigation measures may have an adverse impact on global economic conditions as well as on the Company’s business activities. The extent to which the coronavirus may impact the Company’s business activities will depend on future developments, such as the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in Canada and other countries to contain and treat the disease. The effects that these events will have are highly uncertain and as such, the Company cannot determine the corresponding financial impact at this time.

The common shares trade on the Canadian Stock Exchange (“CSE”) under the symbol “GRHK”.

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Greenhawk Resources Inc. Notes to Condensed Consolidated Interim Financial Statements Three and Six Months Ended June 30, 2021 (Expressed in Canadian Dollars) Unaudited

2. Significant Accounting Policies

Statement of Compliance

The Company applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”). These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by IFRS as issued by the IASB.

The policies applied in these unaudited condensed consolidated interim financial statements are based on IFRSs issued and outstanding as of August 3, 2021, the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these unaudited condensed consolidated interim financial statements as compared with the most recent annual consolidated financial statements as at and for the year ended December 31, 2020, except as noted below. Any subsequent changes to IFRS that are given effect in the Company’s annual consolidated financial statements for the year ending December 31, 2021 could result in restatement of these unaudited condensed consolidated interim financial statements.

Exploration and evaluation expenditures

The Company expenses exploration and evaluation expenditures as incurred. Exploration and evaluation expenditures include acquisition costs of mineral properties, property option payments and evaluation activities. Once a project has been established as commercially viable and technically feasible, related development expenditures are capitalized. Development costs include costs incurred in preparing the site for mining operations. Capitalization ceases when the mine is capable of commercial production.

3. Prepaid expenses and deposits

The Company's prepaid expense comprise the following:

		As at		As at
		June 30,	December 31,
		2021		2020
Prepaid expenses	$	35,599	$	54,582
Vendor deposits		15,996		15,996
	$	51,595	$	70,578
Current	$	35,599	$	54,582
Long-term		15,996		15,996
	$	51,595	$	70,578

Included in the long-term portion of prepaid expenses and deposits as at June 30, 2021, are security deposits for rent of $15,996 (2020 – $15,996) that have been classified as long-term.

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Notes to Condensed Consolidated Interim Financial Statements Three and Six Months Ended June 30, 2021 (Expressed in Canadian Dollars) Unaudited

Greenhawk Resources Inc.

4. Assets and liabilities classified as held for sale and discontinued operations

The Company evaluated the cryptocurrency mining business and decided to divest of its crypto assets. The decision led to the classification of the crypto-mining related assets and liabilities as held for sale.

The following is a summary of the financial performance and cash flow information for the six months ended June 30, 2021 and 2020:

		Six months	Six months	Six months
		ended		ended
		June 30,		June 30,
		2021		2020
Revenue
Digital assets mined	$	-	$	3,102,562
Colocation revenue		-		1,717,114
Cost of revenue
Site operatingcosts		-		(4,049,794)
Net mining income		-		769,882
Expenses
Fair valuegain on re-measurement of digital assets		-		(79,916)
		-		(79,916)
Other income (loss)
Loss on sale of equipment		-		(79,686)
Sales tax recovered		-		27,657
Interest expense		-		(178,622)
Net income from discontinued operations	$	-	$	619,147
		Six months	Six months
		ended		ended
		June 30,		June 30,
		2021		2020
Net cash provided by operating activities	$	-	$	2,609,927
Net cash used in financing activities		-		(3,153,160)
Net cash used in divestingactivities		-		(79,686)

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Notes to Condensed Consolidated Interim Financial Statements Three and Six Months Ended June 30, 2021 (Expressed in Canadian Dollars) Unaudited

Greenhawk Resources Inc.

4. Assets and liabilities classified as held for sale and discontinued operations (Continued)

On April 8, 2020, the Company sold the shares of its wholly-owned subsidiary 9376-9974 Quebec Inc. Hive. As consideration, Hive issued 15,000,000 of its common shares (“Hive Shares”) at $0.20 per share for $3,000,000 of consideration and paid $1,956,231 in cash. Thirty days after closing of the transaction, the Company settled $221,916 in working capital adjustment to Hive for net cash proceeds of $1,734,315.

The following table shows the loss on sale of the subsidiary:

		As at
	April 8, 2020
Consideration received:
Cash	$	1,734,315
Marketable securities		3,000,000
Total disposal consideration		4,734,315
Carrying amount of net assets sold		(5,126,114)
Carrying amount of net assets sold	$	(391,799)
5. Right-of-use assets
Balance, December 31, 2019	$	191,862
Depreciation		(35,974)
Balance, June 30, 2021	$	155,888
6. Equipment
		Office
Cost		Equipment
Balance, December 31, 2020	$	73,883
Disposal		(8,202)
Write-off		(65,681)
Balance, June 30, 2021	$	-
		Office
Accumulated Amortization		Equipment
Balance, December 31, 2020	$	34,592
Amortization		3,284
Disposal		(3,903)
Write-off		(33,973)
Balance, June 30, 2021	$	-
Carrying amounts
Balance, December 31, 2020	$	39,291
Balance, June 30, 2021	$	-

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Greenhawk Resources Inc.

Notes to Condensed Consolidated Interim Financial Statements Three and Six Months Ended June 30, 2021 (Expressed in Canadian Dollars) Unaudited

7. Lease obligations

The following table details the movement in the Company’s lease liability for the six months ended June 30, 2021:

Balance, December 31, 2019	$	136,185
Interest expense		6,910
Leasepayments		(65,964)
Balance, June 30, 2021	$	77,131
Less: currentportion		(77,131)
Non-currentportion	$	-
Maturity analysis – contractual undercounted cash flows
Balance, June 30, 2021
Less than oneyear	$	77,131
Total discounted lease obligation	$	77,131

8. Acquisition of Copenhagen Minerals Inc.

On December 10, 2020, the Company and Greenland Resources Inc. entered into a non-binding letter of intent, which also provided for exclusivity. The exclusivity period was extended twice while the parties negotiated the Share Purchase Agreement. After having the opportunity to negotiate and review the definitive Share Purchase Agreement, the board of directors of the Company unanimously approved a resolution authorizing the Company to enter into the Share Purchase Agreement, the final version of which was executed late on January 27, 2021. On May 21, 2021, the parties to the Share Purchase Agreement, as well as RSG Mining Corp. and certain other parties entered into the Amended and Restated Share Purchase Agreement. The Amended and Restated Share Purchase Agreement provided for the acquisition by the Company of the Storø Gold Project through the acquisition of all of the issued and outstanding shares of Copenhagen Minerals Inc., from Greenland Resources Inc. in exchange for the issuance of 37,600,000 Common Shares of the Company at a deemed issue price of $0.24 per share. Upon closing of the Acquisition, the Company made a cash payment to Greenland Resources Inc. in the amount of $250,000.

The acquisition has been measured using the fair value of the consideration transferred.

The total consideration is set out as follows:

Consideration
Issuance of 37,600,000 common shares	$	9,024,000
Cash		250,000
Total Consideration	$	9,274,000

The allocation of total consideration has been recorded as an acquisition cost for the Storø Gold Project in the condensed consolidated interim Statements of Loss and Comprehensive Loss.

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Greenhawk Resources Inc. Notes to Condensed Consolidated Interim Financial Statements Three and Six Months Ended June 30, 2021 (Expressed in Canadian Dollars) Unaudited

9. Share Capital

(a) Authorized share capital

The authorized share capital consists of an unlimited number of common shares.

(b) Common shares issued

The change in issued share capital for the periods presented were as follows:

Balance, December 31, 2019	12,719,171	$ 79,675,709
Issuance of common shares in connection with conversion of
Convertible Debenture(i)	35,879,991	8,763,000
Balance, June 30, 2020	48,599,162	$ 88,438,709

(i) On June 30, 2020, the Company elected to force conversion of the Convertible Debentures into 35,879,991 common shares of the Company. On conversion the equity value of 8,763,000 was transferred from contributed surplus to share capital. No fractional common shares were issued and any fractions of a Common Share were rounded down to the nearest whole number of common shares.

	Number of
	Shares	Amount
Balance, December 31, 2020	48,599,162	$ 88,438,709
Acquisition of Copenhagen Minerals Inc.(note 8)	37,600,000	9,024,000
Balance, June 30, 2021	86,199,162	$ 97,462,709

10. Stock Options

The Company has a stock option plan ("the Plan") under which the Board of Directors may grant to directors, officers, employees and technical consultants to the Company non-transferable options to purchase common shares, exercisable for a period of up to 5 years from the date of grant.

The following table reflects the continuity of stock options for the periods presented:

			Weighted
	Number of		Average
	Options	Exercise Price
Balance, December 31, 2019 and June 30, 2020	216,667	$	1.95
Balance, December 31, 2020	4,600,000	$	0.27
Granted(i)	4,000,000		0.20
Balance, June 30, 2021	8,600,000	$	0.24

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Notes to Condensed Consolidated Interim Financial Statements Three and Six Months Ended June 30, 2021 (Expressed in Canadian Dollars) Unaudited

Greenhawk Resources Inc.

10. Stock Options (Continued)

The Company had the following stock options outstanding as of June 30, 2021:

			Weighted Average
			Remaining Contractual
Number of Options	Exercisable	Exercise Price	Life(years)	Expiry Date
4,600,000	3,066,667	$0.27	4.31	October 20, 2025
4,000,000	4,000,000	$0.20	4.99	June 24,2026
8,600,000	7,066,667		4.62

The weighted average fair value of the 4,000,000 options granted in the period ended June 30, 2021 was estimated at $0.19 (December 31, 2020 - $0.17) by using the Black-Scholes option pricing model with the following weighted average assumptions:

average assumptions:
	2021	2020
Share price	$0.20	$0.27
Risk-free interest rate	0.97%	0.25%
Dividend yield	0%	0%
Volatility	175.70%	100.00%
Expected life	5years	3years

11. Net loss per Common Share

The calculation of basic and diluted loss per share for the three and six months months ended June 30, 2021 was based on the loss attributable to common shareholders of $10,813,246 and $11,476,815, respectively (three and six months ended June 30, 2020 income of $23,952,245 and $21,761,391, respectively) and the weighted average number of common shares outstanding of 62,049,569 and 55,435,526, respectively (three and six months ended June 30, 2020 - 12,719,171) for basic and diluted (loss) income per share. Diluted income (loss) did not include the effect of options for the three and six months ended June 30, 2021 and 2020.

12. Exploration and Evaluation Expenditures

	Three months	Three months	Three months	Three months		Six months	Six months	Six months
		ended		ended		ended		ended
		June 30,		June 30,		June 30,		June 30,
		2021		2020		2021		2020
Storø Gold Project
Acquisition costs(i)	$	9,274,000	$	-	$	9,274,000	$	-
	$	9,274,000	$	-	$	9,274,000	$	-

(i) Greenhawk owns a 100% legal and beneficial interest in two mineral exploration licenses and one prospecting license in Greenland known as the Storø Gold Project.

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Greenhawk Resources Inc.

Notes to Condensed Consolidated Interim Financial Statements Three and Six Months Ended June 30, 2021 (Expressed in Canadian Dollars) Unaudited

13. Expenses classified by nature

Expenses are classified by function on the statement of income (loss) and comprehensive income (loss) and are comprised of general and administrative. Below is a breakdown of what is included within general and administrative expenses:

	Three months	Three months	Three months	Three months		Six months	Six months	Six months
		ended		ended		ended		ended
		June 30,		June 30,		June 30,		June 30,
		2021		2020		2021		2020
General and administrative
Office and administrative	$	98,628	$	90,343	$	150,928	$	172,010
Legal and professional fees		136,904		256,898		202,334		322,093
Consulting fees		253,758		-		454,547		-
Travel and entertainment		155		1,167		155		76,727
Depreciation		17,987		3,694		39,258		25,375
Salaries		44,892		322,376		59,619		731,296
	$	552,324	$	674,478	$	906,841	$	1,327,501

14. Related-Party Balances and Transactions

The key management personnel of the Company are certain members of the Company’s executive management team and the Board of Directors.

The compensation of such key management for the three and six months ended June 30, 2021 and 2020 included the following:

	Three months	Three months	Three months	Three months		Six months	Six months	Six months
		ended		ended		ended		ended
		June 30,		June 30,		June 30,		June 30,
		2021		2020		2021		2020
Salaries, consulting and director remuneration	$	302,478	$	209,449	$	517,716	$	470,510
Stock-based compensation expense - directors
and officers		952,313		16,713		1,143,262		45,998
	$	1,254,791	$	226,162	$	1,660,978	$	516,508

As at June 30, 2021, included in accounts payable and accrued liabilities was $40,613 (2020 – $29,285) of payments owed to key management personnel.

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