Labrador Resources Inc. — Interim / Quarterly Report 2021

Sep 30, 2021

Unaudited Condensed Interim Financial Statements of

LABRADOR TECHNOLOGIES INC.

Three- and nine- month periods ended July 31, 2021 and 2020

NOTICE OF NO AUDITOR REVIEW OF CONDENSED INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of condensed interim financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements.

The accompanying unaudited condensed interim financial statements of Labrador Technologies Inc. (the “Company”) have been prepared by and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these condensed interim financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of condensed interim financial statements by an entity’s auditor.

LABRADOR TECHNOLOGIES INC.

Condensed Interim Statements of Financial Position

(Unaudited) (expressed in Canadian dollars)

As at	July 31, 2021	October 31, 2020
ASSETS
Current Assets
Cash	$259	$22,536
Total Assets	$259	$22,536
Liabilities and Shareholders' Deficit
Current liabilities
Trade Payables and Accrued Liabilities (note 5)	$276,060	$221,404
Related Party Loans Payable (note 6)	63,113	60,394
Convertible Debenture (note 7)	-	143,069
Total Liabilities	$339,173	$424,867
Shareholders' Deficit
Common Shares (Note 8(a)(b))	$11,860,500	$11,696,655
Warrants (note 8(g))	-	33,519
Contributed Surplus	3,780,874	3,747,355
Deficit	(15,980,288)	(15,879,859)
Total Shareholder's Deficit	(338,914)	(402,331)
Total Liabilities and Shareholders' Deficit	$259	$22,536

Going concern (note 3)

See accompanying notes to the Amended and Restated Condensed Interim Financial Statements Approved by the Board of Directors

“ Signed ” “ Signed ” George Wilson Jeffrey Howe Director Director

LABRADOR TECHNOLOGIES INC.

Condensed Interim Statements of Operations and Comprehensive Income/(Loss)

(Unaudited) (expressed in Canadian dollars)

	Three Months Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
	July 31, 2021	July 31, 2020	July 31, 2021	July 31, 2020
	$	$	$	$
		Restated		Restated
Expenses
General & Administrative	11,833	62,953	80,430	100,185
	11,833	62,953	80,430	100,185
Operating Loss	(11,833)	(62,953)	(80,430)	(100,185)
Finance Costs (note 6, 7)	(4,734)	(2,641)	(19,999)	(5,050)
Other Income	-	-		235,621
Net Income (Loss) &
Comprehensive Income (Loss)	(16,568)	(65,594)	(100,429)	130,386
Earnings (loss) per share
Basic & diluted (note 8)	(0.00)	**(0.01) **	(0.01)	**0.01 **

See accompanying notes to the Condensed Interim Financial Statements

LABRADOR TECHNOLOGIES INC.

Condensed Interim Statements of Changes in Deficit

(Unaudited) (expressed in Canadian dollars)

		Shares to			Contributed
	Capital	be Issued		Warrants	Surplus	Deficit	Total
	$	$		$	$	$	$
Balance at October 31, 2020	11,696,655		-	33,519	3,747,355	(15,879,859)	(402,331)
Common shares issued, net (note 8 (b))	163,845		-	-	-	-	163,845
Options and warrants (note 8(g))	-		-	(33,519)	33,519	-	-
Net loss and comprehensive loss	-		-	-	-	(100,429)	(100,429)
Balance at July 31, 2021	11,860,500		-	-	3,780,874	(15,980,288)	(338,914)
Balance at October 31, 2019	11,670,474		-	46,677	3,720,944	(15,906,991)	(468,896)
Common shares issued, net	26,181		-	-	-	-	26,181
Options and warrants	-		-	(13,158)	26,411	-	13,253
Net loss and comprehensive loss	-		-	-	-	130,386	130,386
Balance at July 31, 2020	11,696,655		-	33,519	3,747,355	(15,776,605))	(299,076)

See accompanying notes to the Condensed Interim Financial Statement

LABRADOR TECHNOLOGIES INC.

Condensed Interim Statements of Cash Flows

(Unaudited) (expressed in Canadian dollars)

	Three Months Ended	Three Months Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
	July	31,	July 31,	July 31,	July 31,
	2021		2020	2021	2020
	$		$	$	$
			Restated		Restated
Cash flows used in operating activities
Net Income (Loss)	(16,568)		(65,594)	(100,429)	130,386
Adjustments for:
Finance costs		4,734	2,641	19,999	5,050
Gain on settlement of debt and payables		-	**- **	-	(235,621)
	(11,833)		(62,953)	(80,430)	(100,185)
Changes in non-cash working capital
Accounts receivable		-	(1,869)	-	(2,700)
Prepaid expenses		-	-	-	1,724
Trade payable and accrued liabilities		4,215	6,980	48,723	8,385
Cash used in operating activities	(7,618)		(57,842)	(31,707)	(92,776)
Interest paid (Note 7)		7,383	**- **	7,383	**- **
Net cash used in operating activities		(235)	(57,842)	(24,325)	(92,776)
Cash flows from financing activities
Proceeds from the convertible debenture		-	150,000	2,047	150,000
Proceeds from loan advances		-	158	-	32,661
Net cash provided by financing activities		-	150,158	2,047	182,661
Increase (decrease) in cash		(235)	92,316	(22,277)	89,885
Cash, beginning of period		494	2,803	22,536	5,234
Cash, end ofperiod		259	95,119	259	**95,119 **

See accompanying notes to the Condensed Interim Financial Statements

LABRADOR TECHNOLOGIES INC.

Notes to Condensed Interim Financial Statements Three- and nine-month periods ended July 31, 2021 and 2020 (Unaudited) (expressed in Canadian dollars)

1. Reporting entity:

Labrador Technologies Inc. (“LTI” or the “Company”) is a company domiciled in Alberta, Canada and is incorporated pursuant to the Business Corporations Act (Alberta), with its common shares listed on the TSX Venture Exchange under the symbol “LTX”.

2. Basis of preparation:

a) Statement of compliance:

These amended and restated condensed interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB"). These condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements of the Company for the year ended October 31, 2020.

The amended and restated condensed interim financial statements were authorized for issue by the Board of Directors on September 29, 2021.

b) Basis of measurement:

The amended and restated condensed interim financial statements have been prepared on the historical cost basis.

Effective August 7, 2020, the Company’s common shares were consolidated on a 20:1 basis (the “Consolidation”) resulting in a reduction in the issued and outstanding shares, options, and warrants (note 8(d)). Shares reserved under the Company’s equity and incentive plans were adjusted to reflect this Consolidation. All share, stock option and warrant, as well as per share, option and warrant data presented in the Company’s condensed interim financial statements have been retroactively adjusted to reflect the share consolidation unless otherwise noted..

c) Debt with warrants and convertible options

The Company issues debt that may have separate warrants, conversion features or no equitylinked attributes which are accounted for as compound or hybrid financial instruments based on its features.

For convertible debt with warrants classified as hybrid financial instruments, the Company elects on an instrument by instrument basis to bifurcate embedded derivatives or fair value of the entire instrument.

d) Use of estimates and judgments:

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies, the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue, costs and expenses for the period. Estimates and underlying assumptions are based on historical experience and other assumptions that are considered reasonable in the circumstances and are reviewed on an ongoing basis. Actual results may differ from such estimates and it is possible that the differences could be material. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. No significant changes in judgement and estimates in the since 2020 year-end or during the reporting period.

3. Going concern:

These amended and restated condensed interim financial statements have been prepared in accordance with IFRS applicable to a going concern, which contemplates, that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its obligations in the normal course of operations.

There is a material uncertainty that may cast a significant doubt about the appropriateness of using the going concern assumption because the Company’s ability to continue as a going concern is dependent upon its ability to generate sufficient cash to settle its existing liabilities and fund its strategic business plan. To date, the Company has no revenue and depends on external financing sources to fund its obligations, including the working capital deficiency of $338,914 as at July 31, 2021 (October 31, 2020 - $402,330).

Management believes the going concern assumption is still appropriate for these condensed interim financial statements but is dependent upon the successful raising of sufficient capital through the Proposed Transaction and generating sufficient operating income to fund operations. If the going

LABRADOR TECHNOLOGIES INC.

Notes to Condensed Interim Financial Statements Three- and nine-month periods ended July 31, 2021 and 2020 (Unaudited) (expressed in Canadian dollars)

concern assumption were not appropriate for these condensed interim financial statements, adjustments would be necessary to the carrying value of assets and liabilities, reported revenues and expenses and the classifications used in the statement of financial position.

4. Summary of significant accounting policies:

The financial framework and accounting policies applied in the preparation of these amended and restated condensed interim consolidated financial statements are consistent with those as disclosed in the most recently completed audited financial statements for the year ended October 31, 2020. These amended and restated condensed interim financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the Company’s October 31, 2020 audited annual financial statements and notes thereto.

5. Trade Payables and Accrued Liabilities:

	July 31,	October 30,
	2021	2020
As at	($)	($)
Trade Payables	141,824	144,899
Employee salaries, commissions and benefits payable	23,500	-
Accrued interest	40,495	38,500
Other accrued liabilities and other payables	30,281	38,004
	276,060	221,403

Trade payables and accrued liabilities include the following related party balances: $23,500 (October 31, 2020 - $nil) in trade payables and $40,495 (2020 – $38,500) in accrued interest. All trade payables and accrued liabilities are currently due and expected to be settled as funding allows. During the nine months ended July 31, 2021 interest expense of $578 (2020 - $1,176) on the outstanding loans was recognized.

During the nine months ended July 31, 2021, the Company converted the outstanding $150,000 Debenture into 1,500,000 common shares at a conversion price of $0.10 per share and the issuance of 73,832 common shares for accrued interest outstanding of $7,383.

6. Related Party Loans Payable:

a) Related Party Transactions:

As at July 31, 2021, the Company had $63,121 (2020 - $60,394) of loans payable and interest accrued to certain officers, directors, former directors, and shareholders. These loans are unsecured and due on demand. $44,708 of these loans bears no interest and the remaining $18,187 bears interest of 12%. Total interest accrued and payable for these loans as at July 31, 2021 was $10,687 (2020 - $10,233). During the nine months ended July 31, 2021, additional advances on these loans of $2,047 (2020 - $33,177) were made to the Company and interest expense of $681 (2020 - $907) on the outstanding loans was recognized.

b) Key Management Personnel Compensation

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

In addition to their salaries and director fees, as applicable, directors and executive officers, along with certain employees of the Company, also participate in the Company’s stock option plan (note 8). Compensation expenses incurred with respect to key management personnel were as follows:

Three months ended July 31, July 31, 2021 2020	Nine months ended July 31, July 31, 2021 2020
$ $	$ $
Consulting fees 10,500 -	37,500 $7,000
Total Compensation 10,500 -	37,500 $7,000

7. Convertible Debenture:

On July 10, 2020, the Company closed its convertible debenture bridge financing (“Units“) for gross proceeds of $150,000 through the issuance of 1,500,000 Units. Each unit consists of one secured

LABRADOR TECHNOLOGIES INC.

Notes to Condensed Interim Financial Statements Three- and nine-month periods ended July 31, 2021 and 2020 (Unaudited) (expressed in Canadian dollars)

debenture and one common share purchase warrant. The conversion price with respect to the common shares issued upon conversion of Debentures is $0.10 per common share on a postconsolidated basis. The debenture is secured by a general security agreement over the Company’s assets. The debenture will bear interest at the rate of 5% per annum and payable semi-annually. Each common share purchase warrant entitles the holder to acquire one common share at an exercise price of $0.10 per warrant for a period of 12 months.

exercise price of $0.10 per warrant for a period of	12 months.
			July 31, 2021
	Debenture	Warrants	Total
	($)	($)	($)
Opening carrying amount, October 31, 2020	136,747	13,253	150,000
Accretion	19,757	-	19,757
Conversion of Debenture into common shares	(156,504)	(13253)	(169,757)
Ending carrying amount, July 31, 2021	-	-	-

The fair value of the liability component at the time of issue of $136,747 was calculated as the discounted cash flows assuming a market interest rate of 14.83%, which was the estimated rate for the convertible debentures without the equity conversion feature or the warrants. The value of the warrants was calculated as the difference between the $150,000 face value of the convertible debenture less the fair value allocated to the liability component.

During the nine months ended July 31, 2021, the Company converted the outstanding $150,000 Debenture into 1,500,000 common shares at a conversion price of $0.10 per share and the issuance of 73,832 common shares for accrued interest outstanding of $7,383. The attached share purchase warrants expired unexercised.

8. Share Capital:

a) Authorized:

Unlimited preferred shares, series A and B, none of which were issued as of July 31, 2021, and unlimited common shares.

b) Common shares issued:

	July 31, 2021
	Number of Amount Shares ($)
Balance, beginning Common share issued, net	8,898,318 11,696,655 1,573,832 163,845
Balance, ending	10,472,150 11,860,500

As described under note 2 (b), on August 7, 2020, Labrador consolidated the Labrador common shares on a 20:1 basis resulting in a reduction in the issued and outstanding shares, stock options and warrants.

On June 30, 2021, the Company converted the outstanding $150,000 Debenture into 1,500,000 common shares at a conversion price of $0.10 per share and the issuance of 73,832 common shares for accrued interest outstanding of $7,383

c) Stock option plan:

The Company has adopted an incentive stock option plan, which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the Exchange’s requirements, grant to directors, officers, employees and technical consultants of the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares of the Company. Such options will be exercisable for a period of up to 10 years from the date of grant. Vesting terms will be determined at the time of grant by the Board of Directors. Vesting terms will be determined at the time of grant by the Board of Directors.

LABRADOR TECHNOLOGIES INC.

Notes to Condensed Interim Financial Statements Three- and nine-month periods ended July 31, 2021 and 2020 (Unaudited)

(expressed in Canadian dollars)

		July 31, 2021		October 31, 2020
	Number of	Weighted	Number of	Weighted
	Options	Average Price	Options	Average Price
Balance	-	$ -	434,000	$ 1.00
Granted	-	$ -	-	$ 1.00
Cancelled/Expired	-	$-	(434,000)	$-
Balance	-	-	-	$-
Exercisable	-	-	-	$ -

• d) As a result of the common share consolidation on a 20:1 basis, the number of issued and outstanding stock options was reduced from 8,680,000 to 434,000 (2019 - from 8,680,000 to 434,000), and weighted average price per stock option has increased from $0.05 to $1.00 (2019 - from $0.05 to $1.00).

• e) All stock option and per stock option data presented in the Company’s financial statements have been retroactively adjusted to reflect the share consolidation unless otherwise noted.

• f) During the year ended October 31, 2020, 434,000 (2019 – 375,000) stock options were cancelled to certain directors, officers and consultants of the Company.

• g) Warrants

g) Warrants
		July 31, 2021		October 30, 2020
	Number of	Weighted	Number of	Weighted
	Warrants	Average Price	Warrants	Average Price
Balance	882,025	$ 1.80	882,025	$ 1.80
Granted	1,500,000	$ 0.10	1,500,000	$ 0.10
Expired	(2,382,025)	$ (0.25)	(719,525)	$ (1.60)
Balance	-	$-	1,662,500	$ 0.25
Exercisable	-	$ -	1,662,500	$0.25

On July 10, 2020, convertible debentures were issued which included 1,500,000 common share purchase warrants. Each warrant is exercisable to acquire one common share for a period of 12 months at an exercise price of $.10 per warrant. Refer to Note 7 for further details on the grants as well as the fair value.

On June 30, 2021, the Company converted the outstanding $150,000 Debenture into 1,500,000 common shares at a conversion price of $0.10 per share and the issuance of 73,832 common shares for accrued interest outstanding of $7,383.

h) Per share amounts:

The weighted average number of common shares outstanding during the nine months ended July 31, 202 1 was 10,472,150 (2020 -8,898,318).

There was no dilutive effect of options and warrants for the nine months ended July 31, 2021 as the exercise prices of the options and warrants are out of the money.

9. Capital Management:

The Company’s objectives in managing capital are to ensure sufficient liquidity to pursue its strategy to maximize the return to its shareholders. The capital structure of the Company consists of cash and shareholders’ deficit. The Company does not have any externally imposed capital requirements and does not presently utilize any quantitative measures to monitor its capital.

The Company makes adjustments to its capital structure in light of general economic conditions and the Company’s working capital requirements. In order to maintain or adjust its capital structure, the Company, upon approval from its Board of Directors, may pay dividends, buy back shares or undertake other activities as deemed appropriate under the specific circumstances. The Board of Directors reviews and approves any material transactions not in the ordinary course of business.

10. Financial Instruments and Financial Risk Management:

i) Determination of Fair Values

The following table analyzes recurring assets and liabilities measured at fair value in the statement of financial position. The different levels are defined as follows:

LABRADOR TECHNOLOGIES INC.

Notes to Condensed Interim Financial Statements Three- and nine-month periods ended July 31, 2021 and 2020 (Unaudited) (expressed in Canadian dollars)

• Level 1 - Determined by reference to quoted in active markets for identical financial assets and liabilities.

• The fair value of loans payable approximates their carrying value as they are payable on demand.

• The fair value of trade payables and accrued liabilities approximates their carrying value due to their short term to maturity.

• Level 2 - Inputs to the valuations, other than quoted prices, are observable for the financial assets and liabilities, either directly or indirectly.

• Level 3 - Inputs to the valuations are based on inputs that are not observable for the financial assets and obligations.

Overview

The Company is exposed to risks of varying degrees of significance, which could affect its ability to achieve its strategic objectives for growth. The main objectives of the Company’s risk management process are to ensure that risks are properly identified and that the capital base is adequate in relation to those risks. The principal financial risks to which the Company is exposed are described below.

a) Interest rate risk:

Interest rate risk is the risk that fair value of a financial instrument or its cash flows will fluctuate as a result of changes in interest rates.

The Company maintains its short-term deposits in instruments that are redeemable at any time without penalty, thereby reducing its exposure to interest rate fluctuations.

The loans payable bear interest at a fixed rate of 12% and are due upon demand, thus the cash flows are not subject to interest rate risk.

b) Liquidity risk:

Liquidity risk is the risk that the Company is not able to meet its financial obligations as they fall due or can do so only at excessive cost. Given that the Company continues to use cash in operations, there are inherent liquidity risks, including the possibility that additional financing may not be available to the Company on a timely basis. Refer to note 3 for details regarding the going concern assumption.

At July 31, 2021, the Company had cash balances of $259 and a working capital deficiency of $338,914.

LABRADOR TECHNOLOGIES INC.

Notes to Condensed Interim Financial Statements Three- and nine-month periods ended July 31, 2021 and 2020 (Unaudited) (expressed in Canadian dollars)

Corporate Information

For further information on Labrador Technologies Inc., Please visit our website www.labradortechnoloqies.com

Board of Directors

George A. Wilson, Q.C., Toronto, Ontario Jeffrey Howe, Toronto, Ontario Alexander Von Gramatzki, Calgary, Alberta - members of the Audit Committee

Executives and Officers

Kaan Camlioglu, Interim Chief Executive Officer Jeffrey Howe, Interim Chief Financial Officer

Auditors

MNP Chartered Professional Accountants #220 330 5 Ave SW Calgary, Alberta, Canada, T2P 0L4

Transfer Agent

Computershare Trust Company of Canada Sixth Floor 530 8[th] Avenue S.W. Calgary, Alberta, Canada T2P 3S8

Solicitors

Fasken Martineau DuMoulin LLP 350 7[th] Avenue SW Calgary, Alberta, Canada T2P 3N9

Stock Exchange

The TSX Venture Exchange Trading Symbol: LTX