Irving Resources Inc. — Interim / Quarterly Report 2021

Oct 28, 2021

IRVING RESOURCES INC.

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED AUGUST 31, 2021

(Expressed in Canadian Dollars)

IRVING RESOURCES INC.

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

	August 31, 2021 February 28, 2021	August 31, 2021 February 28, 2021
ASSETS Current assets Cash $ Receivables (Note 5) Prepaids Property and equipment(Notes 6 and 7) Exploration and evaluation assets(Note 8) Prepaids	12,897,306 $ 8,764,829 7,649 8,090 36,911 121,325 12,941,866 8,894,244 212,442 247,716 25,213,193 22,427,076 287,000 31,551 $ 38,654,501 $ 31,600,587
LIABILITIES & SHAREHOLDERS’ EQUITY Current liabilities Accounts payable and accrued liabilities Due to related parties Lease liabilities (Note 6) Non-current liabilities Lease liabilities (Note 6) Total liabilities Shareholders’ equity Share Capital (Note 10) Reserves (Note 10) Deficit	$ 901,809 - 34,291 936,100 407 936,507 46,561,157 7,014,930 (15,858,093) 37,717,994 $ 38,654,501	$ 771,581 10,571 58,489 840,641 7,282 847,923 38,900,774 5,957,552 (14,105,662) 30,752,664 $ 31,600,587

Nature and Continuance of Operations (Note 1) Subsequent Events (Note 16)

On behalf of the Board:

“Akiko Levinson” Director “Quinton Hennigh” Director

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

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IRVING RESOURCES INC.

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

	Three months ended Aug 31, 2021 Aug 31, 2020	Three months ended Aug 31, 2021 Aug 31, 2020	Three months ended Aug 31, 2021 Aug 31, 2020	Six months ended Aug 31, 2021 Aug 31, 2020
EXPENSES Consulting fees (Note 11) Depreciation (Note 7) Foreign exchange loss (gain) Insurance Interest expense on lease liability (Note 6) Investor relations Management fees (Note 11) Office and miscellaneous Professional fees Property investigation Regulatory fees Salaries and benefits Shareholder costs Share-based compensation (Note 10) Telephone Transfer agent Travel and promotion Operating expenses Interest income Management fee income Loss and comprehensive loss for the period		$ 37,617 25,939 (569,635) 8,443 1,455 20,503 18,000 31,835 42,359 12,665 34,978 31,245 17,362 525,921 5,449 3,261 5,650 (253,047) 8,719 - 8,719 $ (244,328)
Basic and diluted loss per common share		$ (0.00)	$ (0.03) $ (0.03) $ (0.04)
Weighted average number of common shares outstanding		61,874,516	56,103,819 61,019,035 55,510,004

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

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IRVING RESOURCES INC.

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

Number of Shares **Share Capital **	Share Based Payment Reserves	Deficit Total Shareholders' Equity
Balance, February 29, 2020 54,794,738 $ 31,633,494 Private placement 1,279,093 3,517,506 Share issue costs (19,558) Exercise of warrants 417,727 731,022 Exercise of stock options 863,334 1,380,104 Share-based compensation - - Net loss for the period - -	$ 3,202,046 (525,270) 1,037,838 -	$ (8,744,060) $ 26,091,480 3,517,506 (19,558) 731,022 - 854,834 - 1,037,838 (1,960,290) (1,960,290)
Balance, August 31, 2020 57,354,892 37,242,568	3,714,614	(10,704,350) 30,252,832
Balance, February 28, 2021 58,238,971 38,900,774 Private placement 3,575,545 7,544,400 Share issue costs - (17,756) Exercise of stock options 60,000 133,739 Share-based compensation - - Net loss for the period - -	5,957,552 - - (49,739) 1,107,117 -	(14,105,662) 30,752,664 - 7,544,400 - (17,756) - 84,000 - 1,107,117 (1,752,431) (1,752,431)
Balance, August 31, 2021 61,874,516 $ 46,561,157	$ 7,014,930	$ (15,858,093) $ 37,717,994

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

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IRVING RESOURCES INC.

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

Six months ended August 31, 2021 August 31, 2020	Six months ended August 31, 2021 August 31, 2020	Six months ended August 31, 2021 August 31, 2020	Six months ended August 31, 2021 August 31, 2020	Six months ended August 31, 2021 August 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period $ Adjustments Depreciation Interest expense on lease obligations Share-based compensation Foreign exchange Change in non-cash working capital items: Receivables Prepaids Accounts payable and accrued liabilities Due to related parties Net cash used in operating activities CASH FLOWS FROM FINANCING ACTIVITIES Common shares issued Share issue costs Payment of lease obligations Net cash provided by financing activities CASH FLOWS FROM INVESTING ACTIVITIES Exploration and evaluation assets, net of recoveries Exploration and evaluation assets, advances Acquisition of equipment Net cash used in investing activities Change in cash during the period Cash, beginning of the period Cash, end of the period $		(1,752,431) $ 60,563 3,201 1,107,117 (4,726) 441 85,553 (23,821) (10,571) (534,674) 7,628,400 (17,756) (42,914) 7,567,730 (2,632,069) (256,588) (11,922) (2,900,579) 4,132,477 8,764,829 12,897,306 $		(1,960,290) 56,915 4,242 1,037,838 (158) 44,260 (163,791) 281,022 - (699,962) 5,103,362 (19,558) (38,893) 5,044,911 (5,091,861) 226,127 (24,324) (4,890,058) (545,109) 12,993,006 12,447,897

Supplemental disclosure with respect to cash flows (Note 12)

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

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IRVING RESOURCES INC. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

1. NATURE AND CONTINUANCE OF OPERATIONS

Irving Resources Inc. (the “Company” or “Irving”) was incorporated under the Business Corporations Act (British Columbia) on August 28, 2015 under the name 1047431 B.C. Ltd. and changed its name on September 23, 2015 to Irving Resources Inc. The Company’s corporate office is located at 999 Canada Place, Suite 404, Vancouver, BC V6C 3E2.

These condensed interim consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business in the foreseeable future. As at August31, 2021, the Company had working capital of $12,005,766 (February 28, 2021 – $8,053,603). Management estimates these funds are sufficient to meet its immediate liquidity requirements as well as those for the next twelve months.

In response to the World Health Organization declaring a global pandemic in March 2020 as a result of the COVID-19 outbreak, the Company is closely monitoring the developments with a focus on the jurisdictions in which the Company operates, specifically Japan and Canada. This contagious disease, which has continued to spread, has adversely affected workforces, economies and financial markets globally, potentially leading to an economic downturn. The pandemic has not materially affected the Company; however, it is not possible to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations at this time. The Company has implemented safety guidelines at its operations and will continue to closely monitor and assess as needed.

2. BASIS OF PREPARATION

a) Statement of Compliance

These condensed interim consolidated financial statements are prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting under International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

These condensed interim consolidated financial statements follow the same accounting policies and methods of application as the Company’s most recent annual financial statements but do not contain all of the information required for full annual financial statements. Accordingly, these condensed interim consolidated financial statements should be read in conjunction with the Company’s annual financial statements for the year ended February 28, 2021.

b) Basis of Measurement

These condensed interim consolidated financial statements have been prepared on a historical cost basis except for financial instruments measured at their fair value. In addition, these financial statements have been prepared using the accrual basis of accounting except for cash flow information.

c) Approval of the condensed interim consolidated financial statements

These condensed interim consolidated financial statements were reviewed by the Audit Committee and authorized for issue by the Board of Directors on October 27, 2021.

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Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

IRVING RESOURCES INC.

2. BASIS OF PREPARATION (cont’d)

Principles of consolidation

The condensed interim consolidated financial statements include the financial statements of the parent company, Irving Resources Inc., and its subsidiaries listed below:

Irving Resources Japan GK (“Irving GK”) NIRV Resources GK (“NIRV GK”) New River Stone Limited (“NRSL”) Spring Stone Limited (“SSL”) Spring Take Limited (“STL”) Spring Stone Mining Corporation (“SSM”) Spring Stone Exploration Inc.(“SSE”)	Jurisdiction Nature of Operation Equity Interest
	Japan Exploration 100% Japan Exploration 100% Madagascar Exploration 100% Malawi, Africa Exploration 100% Tanzania, Africa Exploration 100% BC, Canada Holding 100% BC, Canada Holding 100%

All inter-company balances and transactions have been eliminated on consolidation. During the year ended February 28, 2021, SSL and NRSL were dissolved.

3. SIGNIFICANT ACCOUNTING POLICIES

Foreign currencies

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

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

New Accounting Standards not yet adopted

The Company has not applied the following revised IFRS that has been issued but was not yet effective at August 31, 2021. The accounting standard is not expected to have a significant effect on the Company’s accounting policies or financial statements.

IAS 16, Property, Plant and Equipment – Proceeds before Intended Use . The amendment prohibits deducting from the cost of property, plant and equipment amounts received from selling items produced while preparing the asset for its intended use. Instead, a company will recognize such sale proceeds and related cost in profit or loss.

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IRVING RESOURCES INC. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both. Significant assumptions about the future and other sources of estimation uncertainty that management has made at the statement of financial position date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

a) Exploration and evaluation expenditures

The application of the Company’s accounting policy for exploration and evaluation expenditures requires judgment in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available. If, after expenditures are capitalized, information becomes available suggesting that the recovery of expenditures is unlikely, the amount capitalized is written off in profit or loss in the period the new information becomes available.

b) Title to mineral property interests

Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

c) Share-based payment transactions

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for sharebased payment transactions are discussed in Note 10.

d) Income taxes

Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company’s current understanding of the tax law. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

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IRVING RESOURCES INC. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d)

In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized. However, utilization of the tax losses also depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped.

e) Leases

The Company applies judgement in determining whether a contract contains an identified asset, whether the Company has the right to control the asset, the term of the lease and discount rate. The lease term is based on considering facts and circumstances, both qualitative and quantitative, that can create an economic incentive to exercise renewal options.

5. RECEIVABLES

The Company’s receivables arise mainly from goods and services tax due from Canadian government taxation authorities.

6. LEASES

The Company has various leases for equipment, housing and office space. The leases are treated as right-ofuse assets and included in Property and Equipment. The lease liability is presented as a separate line in the interim consolidated statement of financial position. The related payments are recognized as an expense in the period in which the payment occurs and are included in the interim consolidated statement of loss and comprehensive loss.

	Six months ended	Year ended February
	August 31, 2021	28, 2021
Opening balance	$ 65,771	$ 100,109
Additions	10,484	36,377
Lease payments made	(42,914)	(68,835)
Interest expense on lease liabilities	3,201	7,512
Foreign exchange adjustment	(1,844)	(9,392)
	34,698	65,771
Less: current portion	(34,291)	(58,489)
Long-term portion	$ 407	$ 7,282

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IRVING RESOURCES INC.

Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

6. LEASES (cont’d)

The remaining minimum future lease payments, excluding estimated operating costs, for the term of the lease including assumed renewal periods are as follows:

$ Fiscal 2022 35,301

7. PROPERTY AND EQUIPMENT

	Right of Use	Machinery			Office
	Assets	and	Computer	furniture and
		equipment	equipment		fixtures	Total
Cost
Balance, February 29, 2020	$ 139,033	$ 183,507	$ 23,158	$	7,827	$ 353,525
Additions	36,377	24,671	4,522		-	65,570
Balance, February 28, 2021	175,410	208,178	27,680		7,827	419,095
Additions	5,854	14,694	-		4,742	25,290
Balance,August31,2021	$181,264	$222,872	$27,680	$	12,569	$444,385
Accumulated depreciation
Balance, February 29, 2020	$ 42,671	$ 11,813	$ 3,245	$	783	$ 58,512
Additions	68,478	36,383	6,619		1,387	112,867
Balance, February 28, 2021	111,149	48,196	9,864		2,170	171,379
Additions	39,599	17,851	2,599		514	60,563
Balance,August 31,2021	$150,748	$ 66,047	$12,463	$	2,684	$231,942
Carrying amounts
At February 28, 2021	$ 64,261	$ 159,982	$ 17,816		$ 5,657	$ 247,716
At August 31,2021	$30,515	$156,825	$15,217		$ 9,885	$212,442

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IRVING RESOURCES INC.

Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

8. EXPLORATION AND EVALUATION ASSETS

The following expenditures were incurred on the Company’s exploration and evaluation assets:

Period ended August 31, 2021	Omu Property		Other Properties		Japan Total
Opening balance, February 28, 2021 Additions: Acquisition costs Assays and sampling Consulting/management/administration Drilling related Geophysics/other engineering studies Materials and supplies Staking and claims registration Travel and transportation Total, exploration and evaluation assets, August 31,2021	$ 21,565,905 655 212,473 646,545 1,160,729 60,401 372,945 41,739 134,014 2,629,501 $24,195,406	$ 861,171 - 19,806 90,069 - 17,080 16,798 2,094 10,770 156,617 $1,017,788		$
Year ended February 28, 2021	Omu Property		Other Properties	Japan Total
Opening balance, February 29, 2020 Additions: Acquisition costs Assays and sampling Consulting/management/administration Drilling related Geophysics/other engineering studies Materials and supplies Staking and claims registration Travel and transportation Total, exploration and evaluation assets, February28,2021	$ 13,598,758 140,300 832,387 1,425,469 3,959,843 207,232 1,105,368 76,404 220,144 7,967,147 $21,565,905		$ 172,133 253,750 58,963 239,372 - 29,893 8,428 97,717 915 689,038 $ 861,171	$ 13,770,891 394,050 891,350 1,664,841 3,959,843 237,125 1,113,796 174,121 221,059 8,656,185 $22,427,076

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IRVING RESOURCES INC. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

8. EXPLORATION AND EVALUATIONS ASSETS (cont’d)

Title to exploration and evaluation assets 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 conveyancing history characteristic of many exploration and evaluation assets. The Company has investigated title to all of its exploration and evaluation assets and to the best of its knowledge, title to all of the assets is in good standing.

a) Omu Property

The Company entered into an agreement to purchase a 100% interest in a mining right for the Omui Property located in Hokkaido, Japan. The mining right encompasses an area of approximately 2.98 sq km. The total purchase price for the mining right is JPY40,000,000 cash (CAD $477,000) and JPY10,000,000 (CAD $118,100) worth of the Company’s common shares. During the year ended February 28, 2017, the Company paid JPY20,000,000 cash (CAD $245,000) towards the acquisition of this agreement. During the year ended February 28, 2018, the balance of JPY20,000,000 cash (CAD $232,000) was paid upon commencement of the definitive registration procedure of the transfer of the mining right and 135,747 common shares of the Company were issued at a value of $118,100 upon completion of the registration of the transfer of the mining right.

The Company has also filed a total of 57 prospecting licenses covering additional prospective ground in the vicinity of the Omui Property.

The Company purchased a total of 1.33 sq km of surface rights covering an area over the Omui Property for total purchase price JPY37,854,974 (CAD$454,723).

The Company entered into long-term leases of surface rights covering a total area of 1.06 sq km in an area over the Omui Property. The total costs for the initial five-year period is JPY10,637,140 (CAD$129,613). The leases are for a five-year term and can be extended for up to three additional five-year periods. Included in long-term prepaids are the refundable deposits associated with these long-term leases.

During the year ended February 28, 2019, the Company entered into an agreement for drilling services and advanced $300,000 to the contractor for work yet to be completed on the Omu Property. During the year ended February 29, 2020, the Company made a further deposit of $380,000 and as at the year ended February 28, 2021, these advances have been reduced to $Nil.

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IRVING RESOURCES INC. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

8. EXPLORATION AND EVALUATION ASSETS (cont’d…)

b) Other Properties

The Company has filed mineral prospecting licenses with the Ministry of Economy, Trade and Industry (METI) in various other areas (Prefectures) within Japan. These mineral prospecting licenses are in various stages of early exploration. The Company will conduct exploration and if a property does not warrant further exploration, the Company will surrender or withdrawal their applications from the METI.

During the year ended February 28, 2021, the Company signed a binding option agreement to acquire the 5.2 sq km Yamagano mining license. The option is exercisable for a period of ten years from the date of the agreement, September 26, 2020. In order to exercise the option, the Company must issue a total of 350,000 common shares over four years, with the initial 87,500 common shares issued during the year ended February 28, 2021 with a value of $253,750, and 87,500 common shares due on each of the first, second and third anniversaries of the date of the agreement and incur, within three years after the date of the agreement, aggregate property expenditures of US$250,000 on the property and on properties controlled by the Company within 10 km of the outer boundaries of the property. The Company also holds four new mineral prospecting licenses immediately east of the Yamagano mining license.

c) Tanzania Property

The Company, through its wholly-owned Tanzanian subsidiary, and with its joint venture participant, JOGMEC, had exploration prospecting licenses in Tanzania, Africa. During the year ended February 28, 2019, the Company elected to surrender the final license and as at August 31, 2021, the Company is in the process of winding up the subsidiary in Tanzania.

d) Malawi Property

The Company had a Rare Earth Element (“REE”) exploration project in Malawi, Africa through its whollyowned Malawian subsidiary, and with its joint venture participant, JOGMEC. During the year ended February 28, 2019, the Company elected to write-down the deferred exploration costs and commenced the process of surrendering the EPL. During the year ended February 28, 2021, the Company received notice that SSL was dissolved.

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Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

IRVING RESOURCES INC.

9. JOINT VENTURES

• a) Joint Exploration Agreement

The Company holds a Joint Exploration Agreement (JEA) under which JOGMEC contributes 67% of the funding and holds a 67% option to all of the JEA projects.

The Company, as operator of the JEA, conducts REE project identification and exploration. The objective of the JEA is to identify, analyze and perform metallurgical evaluation leading to production of REEs. All the property investigation costs will be expensed as incurred until the Company assesses whether there is any future benefit of REEs and acquires the rights to the property.

• b) Project Venture Agreement

On May 9, 2016 and amended on October 31, 2016, the Company entered into a Project Venture Agreement (“PVA”) with JOGMEC in the Republic of Madagascar. The participating interest and contributions of each of the joint venture partners are 90% JOGMEC and 10% the Company, with the Company having an option to increase its participating interest up to 33% with the reimbursement to JOGMEC of a corresponding percentage of the costs incurred on the project. In conjunction with the PVA, the Company has incorporated a joint venture subsidiary in Madagascar named, “New River Stone Ltd”. During the year ended February 28, 2021, the Company dissolved the subsidiary in Madagascar and the PVA was terminated.

10. SHAREHOLDERS’ EQUITY

Authorized

Unlimited number of common shares without par value:

During the period ended August 31, 2021, the Company:

• a) Completed a private placement on April 12, 2021, issuing 3,575,545 common shares for gross proceeds of $7,544,400 at a price of $2.11 per common share.

• b) Issued 60,000 common shares for gross proceeds of $84,000 pursuant to the exercise of stock options. The Company reallocated the fair value of these stock options previously recorded in the amount of $49,739 from reserves to share capital.

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IRVING RESOURCES INC.

Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

10. SHAREHOLDERS’ EQUITY (cont’d…)

During the year ended February 28, 2021, the Company:

• a) Completed a private placement on June 29, 2020, issuing 1,279,093 common shares for gross proceeds of $3,517,506 at a price of $2.75 per common share.

• b) Issued 1,134,999 common shares for gross proceeds of $1,155,997 pursuant to the exercise of stock options. The Company reallocated the fair value of these stock options previously recorded in the amount of $709,963 from reserves to share capital.

• c) Issued 942,641 common shares for gross proceeds of $1,649,622 pursuant to the exercise of warrants.

• d) Issued 87,500 common shares valued at $2.90 per share pursuant to the terms of a mineral property agreement. See Note 8.

Stock options

The Company, in accordance with its stock option plan, is authorized to grant options to directors, employees and consultants, to acquire up to 10% of its issued and outstanding common stock. The exercise price of each option shall not be less than the market price of the Company's stock on the date of grant. The options can be granted for a maximum term of ten years with vesting period determined by the board of directors.

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

	Number of		Weighted Average
	Options		ExercisePrice
Opening balance, February 29, 2020	4,013,334	$	1.90
Granted	1,585,000		3.53
Exercised	(1,134,999)		1.02
Outstanding, February 28, 2021	4,463,335		2.71
Granted	110,000		2.09
Exercised	(60,000)		1.40
Outstanding,August 31,2021	4,513,335	$	2.71

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IRVING RESOURCES INC.

Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

10. SHAREHOLDERS’ EQUITY (cont’d…)

Stock options outstanding at August 31, 2021 are as follows:

Options	Options	Exercise
Outstanding	Exercisable	Price	ExpiryDate
		$
965,000	965,000	1.40	November 7, 2021
126,668	126,668	2.15	April 26, 2022
100,000	100,000	2.87	August 2, 2022
1,361,667	1,361,667	2.70	September 9, 2022
200,000	200,000	2.77	November 5, 2022
10,000	10,000	2.96	December 10, 2022
55,000	55,000	4.00	February 24, 2023
35,000	23,333	2.87	April 24, 2023
1,550,000	516,667	3.55	September 4, 2023
110,000	-	2.09	March 1, 2024
4,513,335	3,358,335

Warrants

Warrant transactions and the number of warrants outstanding are summarized as follows:

		Weighted
	Number of	Average
	Warrants	Exercise Price
Opening balance, February 29, 2020	942,641	$ 1.75
Exercised	(942,641)	1.75
Outstanding,February28,2021andAugust 31,2021	-	$-

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IRVING RESOURCES INC. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

10. SHAREHOLDERS’ EQUITY (cont’d…)

Share-based compensation

During the period ended August 31, 2021, the Company granted 110,000 stock options to directors, officers, employees and consultants (2020 – 35,000). The estimated weighted average fair value of these options is $1.21 per option (2020 - $1.77). The total amount of fair value of vested stock options amortized during the period is $1,107,117 (2020 - $1,037,838). This amount has been expensed as share-based compensation in the statement of loss and comprehensive loss.

The following weighted average assumptions were used for the Black-Scholes valuation of stock options granted during the year:

	Six months ended	Six months ended
	August 31, 2021	August 31, 2020
Risk-free interest rate	0.34%	0.32%
Expected life of options	3.0 years	3.0 years
Annualized volatility	100.00%	100.00%
Dividend rate	0.00%	0.00%
Forfeiture rate	0.00%	0.00%

11. RELATED PARTY TRANSACTIONS

	Six months ended	Six months ended	Six months ended	Six months ended
	August	31,2021	August	31,2020
Management fees	$	94,625	$	97,740
Consulting fees		159,780		166,438
	$	254,405	$	264,178

• a) Included in the management fees were fees for services provided by the President and Chief Executive Officer and Chief Financial Officer.

• b) Included in consulting fees are amounts paid to independent directors for services other than their role as directors.

• c) During the period, Nil (2020 – Nil) stock options were granted to directors and officers. The total vested share-based compensation allocated to directors and officers is $617,548 (2020 - $526,347).

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IRVING RESOURCES INC. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

11. RELATED PARTY TRANSACTIONS (cont’d…)

As of August 31, 2021, $Nil (February 28, 2021 – $10,571) is due to related parties. The amounts due to related parties are unsecured, non-interest bearing, and have no specific terms of payment.

Key Management Compensation

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.

Other than disclosed above, there was no other compensation paid to key management during the periods ended August 31, 2021 and 2020.

12. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

The significant non-cash transactions for the period ended August 31, 2021:

a) Included in accounts payable and accrued liabilities are $801,983 related to deferred exploration costs.

The significant non-cash transactions for the period ended August 31, 2020:

b) Included in accounts payable and accrued liabilities are $761,021 related to deferred exploration costs.

13. SEGMENTED INFORMATION

The Company has mineral properties and property and equipment located geographically as follows:

As at August 31, 2021				Property and equipment Exploration and evaluation assets
Canada Japan Total				$ 15,998 $ - 196,444 25,213,193 $212,442 $25,213,193
				Property and equipment Exploration and evaluationassets $ 28,476 $ - 219,240 22,427,076 $247,716 $22,427,076
As atFebruary28,2021
Canada Japan Total

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IRVING RESOURCES INC.

Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

IFRS 7 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

As at August 31, 2021, the Company’s financial instruments are comprised of cash, receivables, accounts payable and accrued liabilities, due to related parties and lease obligations. The carrying value of receivables, accounts payable and accrued liabilities and due to related parties approximates their fair values due to the relatively short periods to maturity of these financial instruments. The long-term portion of lease obligations is accreted over the lease terms at market interest rate using the effective interest rate method.

Financial instruments measured at fair value on the statement of financial position are summarized in levels of the fair value hierarchy as follows:

Assets	Level 1	Level 2	Level 3	Total
Cash Total	$ 12,897,306 $ 12,897,306	- $ -	- $ -	$ 12,897,306 $ 12,897,306

The Company has exposure to the following risks from its use of financial instruments: credit risk, liquidity risk and market risk. Management and the Board of Directors monitor risk management activities and review the adequacy of such activities.

Credit risk

Credit risk is the risk of potential loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations. The Company’s credit risk is limited to the carrying amount on the statement of financial position and arises from the Company’s cash and receivables.

The Company’s cash is held with high-credit quality financial institutions. Receivables mainly consist of goods and services tax due from the Federal Government of Canada and amounts due from joint venture partner.

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IRVING RESOURCES INC. Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (cont’d…)

Liquidity risk

Liquidity risk is the risk that the Company will not meet its financial obligations as they fall due. The Company manages its liquidity risk by forecasting cash flows from operations, and anticipating investing and financing activities. As at August 31, 2021, the Company had cash of $12,897,306 to settle current liabilities of $936,100 which have contractual maturities of less than 30 days and are subject to normal trade terms.

Market risk

Market risk is the risk of loss that may arise from changes in market prices, such as interest rates and foreign exchange rates.

i) Interest rate risk

The Company has cash balances and no interest-bearing debt. The Company’s current policy is to invest excess cash in investment-grade short-term certificates of deposits issued by its banking institutions. The Company periodically monitors the investments it makes and is satisfied with the credit rating of its banks.

ii) Price risk

The Company is exposed to price risk with respect to commodity and equity prices. The ability of the Company to explore its mineral properties and future profitability of the Company are directly related to the market price of rare earth elements and other non-gold minerals. The Company monitors commodity prices to determine appropriate actions to be undertaken.

iii) Foreign exchange rate risk

The Company’s functional currency is the Canadian dollar and major purchases are transacted in Canadian dollars. The Company funds certain operations, exploration and administrative expenses by using US Dollars and Japanese Yen converted from its Canadian bank accounts. Management is aware of the possibility of foreign exchange risk derived from currency conversions. Based on the net US dollar and Japanese Yen asset and liability exposure as at August 31, 2021 a 10% fluctuation in the CAD/US and CAD/YEN exchange rates would impact the Company’s earnings by approximately $1,210,000. The Company has not entered into any agreements or purchased any instruments to hedge possible foreign exchange rate risk at this time.

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IRVING RESOURCES INC.

Notes to the Condensed Interim Consolidated Financial Statements For the six months ended August 31, 2021 (Expressed in Canadian Dollars)

15. CAPITAL MANAGEMENT

The Company considers items in its shareholders’ equity as capital. The Company’s capital management objectives are to safeguard its ability to continue as a going concern and to have sufficient capital to be able to meet the Company’s property exploration plans and to ensure the growth of activities.

The Company sets the amount of capital in proportion to 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. The Company is in the exploration stage; as such the Company will rely on the equity markets to fund its activities. The Company will continue to assess new sources of financing available and to manage its expenditures to reflect current financial resources in the interest of sustaining long term viability.

16. SUBSEQUENT EVENTS

• a) Subsequent to August 31, 2021, the Company issued 87,500 common shares as part of a mining option agreement as outlined in note 8(b).

• b) Subsequent to August 31, 2021, there were 60,000 stock options exercised for gross proceeds of $84,000.

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