Pan Global Resources Inc. — Interim / Quarterly Report 2021

Sep 29, 2021

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars)

July 31, 2021

NOTICE TO READER

The accompanying unaudited condensed interim consolidated financial statements of Pan Global Resources Inc. for the six months ended July 31, 2021 and 2020 have been prepared by management and approved by the Audit Committee and the Board of Directors of the Company. These condensed interim consolidated financial statements have not been reviewed by the Company’s external auditors.

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PAN GLOBAL RESOURCES INC. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited - Expressed in Canadian dollars)

		July 31,		January 31,
		2021		2021
ASSETS
Current assets
Cash	$	16,903,572	$	3,897,290
Receivables (Note 3)		523,610		219,129
Prepaid expenses		11,006		41,147
Total current assets		17,438,188		4,157,566
Non-current assets
Exploration and evaluation assets (Note 4)		1,909,183		1,909,183
Reclamation deposits		72,169		75,569
Right-of-use assets(Note 5)		11,468		16,762
Total non-current assets		1,992,820		2,001,514
TOTAL ASSETS	$	19,431,008	$	6,159,080
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities (Note 6)	$	1,140,551	$	484,456
Lease liabilities(Note 7)		9,651		10,580
Total current liabilities		1,150,202		495,036
Non-current liabilities
Lease liabilities(Note 7)		2,504		7,751
Total liabilities		1,152,706		502,787
SHAREHOLDERS' EQUITY
Share capital (Note 8)		39,654,760		22,979,849
Reserves (Note 8)		6,085,681		6,580,131
Deficit		(27,462,139)		(23,903,687)
Total shareholders' equity		18,278,302		5,656,293
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	19,431,008	$	6,159,080
Nature of operations and going concern(Note 1)
Event after reporting date(Note 14)

These condensed interim consolidated financial statements are authorized for issuance by the Board of Directors on September 29, 2021.

Approved on behalf of the Board of Directors

” Timothy Moody ” Director ” Patrick Evans ” Director

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

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PAN GLOBAL RESOURCES INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Unaudited - Expressed in Canadian dollars)

		Three months	ended July 31,	ended July 31,		Six months ended July 31,	Six months ended July 31,	Six months ended July 31,
		2021		2020		2021		2020
Exploration expenditures (Note 4)	$	1,698,099	$	265,664	$	3,083,432	$	749,409
General and administrative expenses
Accounting, tax, and audit (Note 10)		18,500		16,000		36,000		31,106
Depreciaton (Note 5)		2,294		4,409		5,294		8,818
Consulting and management fees (Note 10)		73,000		82,000		105,036		112,000
Investor relations		53,532		49,369		100,069		121,096
Office and rent		6,348		321		13,357		2,845
Professional fees (Note 10)		32,100		15,350		51,990		23,540
Regulatory and transfer agent		16,116		5,851		30,640		13,650
Share-based compensation (Notes 8, 10)		-		1,273,845		-		1,273,845
Travel and related		856		20		2,101		2,209
		202,746		1,447,165		344,487		1,589,109
Loss from operations		(1,900,845)		(1,712,829)		(3,427,919)		(2,338,518)
Interest income		7,750		-		12,190		-
Accretion expense (Note 7)		(205)		(454)		(453)		(964)
Foreign exchange and other		(180,618)		40,884		(142,270)		79,802
LOSS AND COMPREHENSIVE LOSS	$	(2,073,918)	$	(1,672,399)	$	(3,558,452)	$	(2,259,680)
Loss and comprehensive loss attributable to:
Equity holders of the Company	$	(2,073,918)	$	(1,667,600)	$	(3,558,452)	$	(2,248,146)
Non-controllinginterest(Note 9)		-		(4,799)		-		(11,534)
	$	(2,073,918)	$	(1,672,399)	$	(3,558,452)	$	(2,259,680)
Loss per common share - basic and diluted	$	(0.01)	$	(0.01)	$	(0.02)	$	(0.02)
Weighted average number of common shares
basic and diluted		173,429,545		125,201,233		163,890,756		123,787,836

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

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PAN GLOBAL RESOURCES INC. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - Expressed in Canadian dollars)

		Six months ended	Six months ended	July 31,
		2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period	$	(3,558,452)	$	(2,259,680)
Items not affecting cash:
Depreciaton		5,294		8,818
Share-based compensation		-		1,273,845
Interest income		(12,190)		-
Accretion expense		453		964
Unrealized foreign exchange effect		2,610		9,764
Changes in non-cash working capital items:
Receivables		(304,481)		113,305
Prepaid expenses		30,141		(58,372)
Accountspayable and accrued liabilities		656,095		(14,692)
Net cash used in operating activities		(3,180,530)		(926,048)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest earned		12,190		-
Exploration and evaluation assets		-		(37,636)
Reclamation deposits		-		22,412
Net cashprovided by (used in) investing activities		12,190		(15,224)
CASH FLOWS FROM FINANCING ACTIVITIES
Private placement financing		14,950,230		4,095,719
Share issue costs		(1,103,049)		(194,999)
Exercise of stock options		8,990		-
Exercise of share purchase warrants		2,324,289		139,858
Leasepayments		(5,838)		(9,743)
Net cashprovided by financing activities		16,174,622		4,030,835
Change in cash during the period		13,006,282		3,089,563
Cash, beginning ofperiod		3,897,290		1,119,914
Cash, end ofperiod	$	16,903,572	$	4,209,477

Supplemental disclosure with respect to cash flows (Note 11)

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

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PAN GLOBAL RESOURCES INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited - Expressed in Canadian dollars)

	Number of
	common		Share					Non-controlling
	shares		capital		Reserves		Deficit		interest		Total
Balance at January 31, 2020	121,828,903	$	17,895,123	$	4,549,299	$	(18,790,711)	$	(309,940)	$	3,343,771
Shares issed on private placement	22,753,997		2,421,485		1,674,234		-		-		4,095,719
Share issue costs	-		(194,999)		-		-		-		(194,999)
Finders' warrants issued	-		(79,529)		79,529		-		-		-
Exercise of share purchase warrants	994,190		162,758		(22,900)		-		-		139,858
Loss for theperiod	-		-		-		(2,248,146)		(11,534)		(2,259,680)
Balance at July 31, 2020	145,577,090	$	20,204,838	$	6,280,162	$	(21,038,857)	$	(321,474)	$	5,124,669
	Number of
	common		Share					Non-controlling
	shares		capital		Reserves		Deficit		interest		Total
Balance at January 31, 2021	153,430,635	$	22,979,849	$	6,580,131	$	(23,903,687)	$	-	$	5,656,293
Shares issed on private placement	24,917,050		14,950,230		-		-		-		14,950,230
Share issue costs	-		(1,103,049)		-		-		-		(1,103,049)
Exercise of stock options	29,000		17,786		(8,796)		-		-		8,990
Exercise of share purchase warrants	10,704,566		2,809,944		(485,654)		-		-		2,324,290
Loss for theperiod	-		-		-		(3,558,452)		-		(3,558,452)
Balance at July 31, 2021	189,081,251	$	39,654,760	$	6,085,681	$	(27,462,139)	$	-	$	18,278,302

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

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PAN GLOBAL RESOURCES INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars) FOR THE SIX MONTHS ENDED JULY 31, 2021

1. NATURE OF OPERATIONS AND GOING CONCERN

Pan Global Resources Inc. (hereafter referred to as the “Company”) was incorporated under the laws of the Province of British Columbia and was established as a legal entity on February 1, 2006. On December 21, 2009, the Company changed its name from Mosam Capital Corp. to Pan Global Resources Inc.

The Company’s principal business activities are the acquisition of rights to explore for minerals and the exploration of acquired rights. The Company is primarily focused on the early stage exploration through to development of resources of copper and other metals in Spain. In addition, the Company acquired 100% interest in Minera Aguila S.L.U. (“MASL”) (Note 4) and signed a Letter of Intent (“LOI”) with EVALAM2003 S.L. (“EVALAM”) to acquire the Escacena Investigation Permit (Note 4). The Company is continuing to review a number of other opportunities.

The Company’s common shares are listed on the TSX Venture Exchange (“TSX-V”) under the trading symbol “PGZ”. The Company’s principal office is located at 700 - 1199 West Hastings Street, Vancouver, British Columbia, V6E 3T5.

As at July 31, 2021, the Company had a working capital of $16,287,986, recorded a net loss of $3,558,452 for the six months then ended, and had accumulated a total deficit of $27,462,139. These condensed interim consolidated financial statements are prepared on a going concern basis, which presumes the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. The ability of the Company to continue as a going concern depends upon its ability to raise adequate financing and develop profitable operations. These condensed interim consolidated financial statements do not include any adjustments to amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue operations. As at July 31, 2021, the Company has not achieved profitable operations and has accumulated losses since inception.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation and Measurement

The condensed interim consolidated financial statements have been prepared using accounting policies in compliance with International Financial Reporting Standards (“IFRS”) as issued by International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). These condensed interim consolidated financial statements have been prepared on a historical cost basis, except for financial instruments, which have been measured at fair value. In addition, these condensed interim consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.

These condensed interim consolidated financial statements follow the same accounting policies and methods of application as our most recent annual consolidated financial statements, except as described below, and should be read in conjunction with the annual audited consolidated financial statements of the Company for the year ended January 31, 2021.

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PAN GLOBAL RESOURCES INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars) FOR THE SIX MONTHS ENDED JULY 31, 2021

3. RECEIVABLES

The Company’s receivables arise from GST and VAT due from the Canadian and Spanish taxation authorities.

4. EXPLORATION AND EVALUATION ASSETS

Aguilas Project, Spain

In November 2016, the Company entered into a share option agreement with a related party (Note 10) for an option to acquire up to a 100% interest of a Spanish exploration company, MASL, who has been granted two mineral exploration licenses, and applied for the issuance of an additional seven mineral exploration licenses in the Provinces of Cordoba and Ciudad Real, Kingdom of Spain, collectively referred to as the “Aguilas Project”. For the duration of the agreement, MASL shall act as the operator of the exploration program and the related exploration expenditures shall be funded by the Company. The Company has agreed to the aggregate consideration of 4,700,000 common shares of the Company, cash payments of $450,000, and exploration expenditure commitments as follows:

		Cash	Common		Exploration
		payments	shares	expenditures⁽²⁾
6-month anniversay of final TSX-V approval⁽¹⁾	$	50,000	2,200,000	$	-
18-month anniversay of final TSX-V approval⁽¹⁾		150,000	2,500,000		-
36-month anniversay of final TSX-V approval⁽¹⁾		250,000	-		-
36-month anniversayof agreement closingdate⁽¹⁾		-	-		1,000,000
	$	450,000	4,700,000	$	1,000,000

• ⁽¹⁾ Cash paid and common shares issued; expenditure requirement completed

⁽²⁾ No less than $250,000 have been completed notwithstanding any decision by the Company not to proceed with further exploration.

Furthermore, the Company may pay $100,000 (or issue 1,000,000 common shares the Company, at the election of the optionor) if the Company acquires additional exploration rights in the area of 10 kilometers surrounding the boundaries of the three exploration licenses. In November 2017, the Company paid $50,000 to the optionor to remove this term of the agreement.

In April 2018, the Company exercised its first option to acquire a 70% equity interest in MASL. The Company paid $50,000 and issued 2,200,000 common shares (valued at $440,000) to the optionor. In addition, net advances of $341,466 from the Company, representing unspent funds held by MASL, remained in MASL.

In September 2018, the Company paid $150,000 and issued 2,500,000 common shares of the Company, valued at $425,000.

In August 2020, the Company made the final payment for the remaining 30% ownership interest of MASL.

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PAN GLOBAL RESOURCES INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars) FOR THE SIX MONTHS ENDED JULY 31, 2021

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

Escacena Project

In December 2018, EVALAM was granted the Escacena Investigation Permit located in the Iberian Pyrite Belt in southern Spain, which is the subject of the LOI between EVALAM and the Company, who has an option to acquire 100% of the Escacena Investigation Permit for the following consideration: (a) $350,000 in cash and (b) $1,000,000 in exploration work commitments over a three-year period (spent). EVALAM will retain a net smelter return (“NSR”) of 0.5% on the first 12,500 tonnes of copper equivalent and 0.75% on any amount in excess of 12,500 tonnes of copper equivalent. The NSR also has a lifetime cap of $5,000,000.

In November 2019, the Company entered into an agreement, through its subsidiary, with Strategic Minerals Spain, S.L. to acquire all rights to the Al Andalus Investigation Permit, covering an area adjacent to the Company's Escacena Project. The Company paid €300,000 consisting of an initial payment of €275,000 and a final payment of €25,000.

Exploration Expenditures

For the six months ended July 31, 2021		Aguilas		Escacena		Total
Drilling	$	6,265	$	1,684,475	$	1,690,740
License fees		699		209,335		210,034
Professional fees		68,629		226,811		295,440
Technical consulting		30,000		30,000		60,000
Technical services		-		814,318		814,318
Travel		2,792		10,108		12,900
	$	108,385	$	2,975,047	$	3,083,432
For the six months ended July 31, 2020		Aguilas		Escacena		Total
Drilling	$	-	$	201,046	$	201,046
License fees		25,168		50,356		75,524
Professional fees		21,659		78,343		100,002
Technical consulting		30,000		30,000		60,000
Technical services		18,523		289,335		307,858
Travel		255		4,724		4,979
	$	95,605	$	653,804	$	749,409

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PAN GLOBAL RESOURCES INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars) FOR THE SIX MONTHS ENDED JULY 31, 2021

5. RIGHT-OF-USE ASSETS

		Amount
As at January 31, 2021, net	$	16,762
Depreciation		(5,294)
As at July 31, 2021, net	$	11,468

6.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The Company’s accounts payable and accrued liabilities consist of the following:

		July 31,		January 31,
		2021		2021
Accounts payable	$	1,026,051	$	401,956
Accrued liabilities		114,500		82,500
	$	1,140,551	$	484,456

7. LEASE LIABILITIES

		July 31,		January 31,
		2021		2021
Not later than one year	$	10,118	$	11,370
Later than one year and not later than five years		2,530		7,946
Later than fiveyears		-		-
Total minimum lease payments		12,648		19,316
Future finance charges at implicit rate		(493)		(985)
Total balance		12,155		18,331
Less: currentportion		9,651		10,580
Long-termportion	$	2,504	$	7,751

During the six months ended July 31, 2021, the Company recognized accretion charge of $453 (2020 - $964) on its liabilities.

8. SHARE CAPITAL

Authorized Share Capital

Authorized share capital consists of:

• unlimited number of common shares without par value

• unlimited class “A” common shares with a par value of $1

• unlimited class “B” common shares with a par value of $5

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PAN GLOBAL RESOURCES INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars) FOR THE SIX MONTHS ENDED JULY 31, 2021

8. SHARE CAPITAL (cont’d…)

Authorized Share Capital

In July 2021, the Company completed an underwritten private placement issuing 24,917,050 common shares at a price of $0.60 per share for aggregate gross proceeds of $14,950,230. The Company paid cash commission of $897,014. The common shares issued are subject to a four-month holding period.

In July 2020, the Company completed a non-brokered private placement issuing 22,753,997 units at a price of $0.18 per unit for aggregate gross proceeds of $4,095,719, where each unit is comprised of one common share and onehalf share purchase warrant, where each full warrant is exercisable at $0.28 per share for two years. The Company paid finders' fees of $96,300 and issued 535,000 finders' warrants valued at $79,529, where each warrant is exercisable at $0.28 per share for two years. The share purchase warrants and finders' warrants issued may be subject to acceleration. The units, common shares, share purchase warrants, finders' warrants and shares issued upon exercise of the share purchase warrants and/or the finders' warrants are subject to a four-month holding period. In accordance with the Company’s accounting policy, $1,674,234 of the gross proceeds were allocated to its reserves.

Stock Options

The continuity of stock options for the six months ended July 31, 2021 are as follows:

	Number of		Weighted
	stock		average
	options	exerciseprice
Balance, January 31, 2021	11,030,000	$	0.21
Exercised	(29,000)		0.31
Expired/cancelled	(90,000)		0.16
Balance, July 31, 2021	10,911,000	$	0.21

As at July 31, 2021, the weighted average remaining life of the stock options outstanding is 7.44 (January 31, 2021 - 7.93) years. The Company’s outstanding stock options as at July 31, 2021 are as follows:

		Exercise
Expiry date		price	Outstanding	Exercisable
Apr 18, 2027	$	0.10	2,310,000	2,310,000
Dec 01, 2027	$	0.20	2,650,000	2,650,000
Jun 20, 2028	$	0.215	125,000	125,000
Apr 16, 2029	$	0.10	1,655,000	1,655,000
Jul 31,2030	$	0.31	4,171,000	4,171,000
Total			10,911,000	10,911,000

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PAN GLOBAL RESOURCES INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars) FOR THE SIX MONTHS ENDED JULY 31, 2021

8. SHARE CAPITAL (cont’d…)

Share Purchase Warrants

The continuity of share purchase warrants for the six months ended July 31, 2021 are as follows:

	Number of		Weighted
	share purchase		average
	warrants	exerciseprice
Balance, January 31, 2021	32,371,815	$	0.24
Exercised	(10,704,566)		0.22
Balance, July 31, 2021	21,667,249	$	0.25

As at July 31, 2021, the weighted average remaining life of the share purchase warrants outstanding is 0.60 (January 31, 2021 - 0.97) years. The Company’s outstanding share purchase warrants as at July 31, 2021 are as follows:

		Exercise
Expiry date		price	Outstanding
Aug 20, 2021⁽²⁾	$	0.20	4,360,000
Dec 16, 2021	$	0.24	6,942,683
Jul 20,2022⁽¹⁾	$	0.28	10,364,566
Total			21,667,249

⁽¹⁾ Expiry may be accelerated, if the volume weighted average trading price of the Company's common shares on the TSX-V was greater than $0.32 for 20 consecutive trading days. ⁽²⁾ Exercised subsequently

Share-based payments

In July 2020, the Company granted 4,200,000 stock options to directors, officers, and employees of the Company with an exercise price of $0.31 per option with an expiry date of April 31, 2030. Using the fair value method for share-based payments, the Company determined the weighted average fair value of the options granted to be $1,273,845 or $0.30 per share.

The fair value of the stock options granted and share purchase warrants issued was estimated using the BlackScholes option pricing model with weighted average assumptions as follows:

	July 31,	July 31,
For the six months ended	2021	2020
Risk free interest rate	n/a	0.28%
Expected dividend yield	n/a	0%
Expected stock price volatility	n/a	153%
Expected life in years	n/a	4
Forfeiture rate	n/a	0%

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PAN GLOBAL RESOURCES INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars) FOR THE SIX MONTHS ENDED JULY 31, 2021

9. NON-CONTROLLING INTEREST

Up until the final option payment was made (Note 4), MASL was a 70%-owned subsidiary of the Company and was 30%-owned by a minority shareholder. For the six months ended July 31, 2020, loss of $11,534 has been allocated to the non-controlling interest of MASL. Summarized financial information about MASL is as follows:

		July 31,		July 31,
For the six months ended		2021⁽¹⁾		2020
Current assets	$	-	$	336,455
Non-current assets		-		1,567,515
Current liabilities		-		36,469
Net loss and comprehensive loss	$	-	$	38,446
⁽¹⁾ In August 2020, the Company acquired the minority shareholder's 30% ownership

10. RELATED PARTY TRANSACTIONS

The aggregate value of transactions and outstanding balances relating to directors and key management personnel including the Company’s President & Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and Corporate Secretary were as follows:

		Fees or		Share-based
For the six months ended July 31, 2021		salaries	compensation			Total
President & CEO	$	120,000	$	-	$	120,000
Corporate Secretary		51,990		-		51,990
CFO		12,000		-		12,000
Directors		43,000		-		43,000
	$	226,990	$	-	$	226,990
		Fees or		Share-based
For the six months ended July 31, 2020		salaries	compensation			Total
President & CEO	$	120,000	$	242,637	$	362,637
Corporate Secretary		45,540		30,330		75,870
CFO		12,000		15,165		27,165
Directors		52,000		879,560		931,560
	$	229,540	$	1,167,692	$	1,397,232

As at July 31, 2021, included in accounts payable and accrued liabilities is $23,500 (January 31, 2021 - $15,500) owing to the related parties as follows: $16,000 (January 31, 2021 - $12,000) to the CFO and $7,500 (January 31, 2021 - $3,500) to the Corporate Secretary of the Company.

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PAN GLOBAL RESOURCES INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars) FOR THE SIX MONTHS ENDED JULY 31, 2021

11. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

During the six months ended July 31, 2021, the Company reallocated $494,450 from reserves for exercise of stock options and share purchase warrants.

During the six months ended July 31, 2020, the Company:

a) reallocated $1,674,234 of gross proceeds to reserves on the closing of its private placement (Note 8);

b) issued 535,000 finders’ warrants, valued at $79,529, as finders’ fees (Note 8); and

• c) reallocated $22,900 from reserves for exercise of share purchase warrants.

12. SEGMENTED INFORMATION

The Company operates in one reportable operating segment: the exploration and development of mineral properties. Summarized financial information for the geographic segments the Company operates in are as follows:

As at July 31, 2021		Canada		Spain		Total
Exploration and evaluation assets	$	-	$	1,909,183	$	1,909,183
Reclamation deposits		-		72,169		72,169
Right-of-use assets		-		11,468		11,468
Total	$	-	$	1,992,820	$	1,992,820
As at January 31, 2021		Canada		Spain		Total
Exploration and evaluation assets	$	-	$	1,909,183	$	1,909,183
Reclamation deposits		-		75,569		75,569
Right-of-use assets		-		16,762		16,762
Total	$	-	$	2,001,514	$	2,001,514

13. FINANCIAL INSTRUMENTS, RISK AND CAPITAL MANAGEMENT

Financial Instruments

The Company classified its financial instruments as follows:

		July 31,		January 31,
		2021		2021
Financial assets - amortized cost:
Cash	$	16,903,572	$	3,897,290
Financial liabilities - amortized cost
Accountspayable and accrued liabilities	$	1,140,551	$	484,456

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PAN GLOBAL RESOURCES INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars) FOR THE SIX MONTHS ENDED JULY 31, 2021

13. FINANCIAL INSTRUMENTS, RISK AND CAPITAL MANAGEMENT (cont’d…)

Fair Value

Financial instruments recorded at fair value on the consolidated statement of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• a) Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;

• b) Level 2 - Inputs other than quoted prices that are observable for assets or liabilities, either directly or indirectly; and

• c) Level 3 - Inputs for assets and liabilities that are not based on observable market data.

The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value. The carrying value of cash and accounts payable and accrued liabilities approximated their fair value because of the short-term nature of these instruments.

Risk and Capital Management

The Company’s capital includes share capital and the cumulative deficit. The Company’s objectives when managing capital are to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. The Company may issue new shares in order to meet its financial obligations. There was no change in the Company’s approach to managing capital during the six months ended July 31, 2021. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.

The Company’s activities expose it to a variety of financial risks, market risk (including currency risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Company. This note presents information about the Company’s exposure to each of these risks, the Company’s objectives and processes for measuring and managing risk, and the Company’s management of capital.

Credit Risk

Credit risk arises from cash and deposits with banks, as well as credit exposure on outstanding receivables and committed transactions. There is no significant concentration of credit risk. The Company’s cash deposits are primarily held with a Canadian chartered bank. The Company has minimal accounts receivable exposure as it relates to amounts due from the governments of Canada and Spain pursuant to goods and services tax and VAT credits.

Interest Rate Risk

As the Company’s interest-bearing assets do not have significant interest rates, the Company’s income and operating cash flows are not significantly affected by changes in market interest rates.

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PAN GLOBAL RESOURCES INC. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited - Expressed in Canadian dollars) FOR THE SIX MONTHS ENDED JULY 31, 2021

13. FINANCIAL INSTRUMENTS, RISK AND CAPITAL MANAGEMENT (cont’d…)

Currency Risk

The Company has identified its functional currency as the Canadian dollar. Certain of the Company’s exploration expenditures have been denominated in Euros and United States dollars (“USD”). The Company’s exposure to foreign currency risk arises primarily on fluctuations between the Canadian dollar and those currencies. The Company has not entered into any derivative instruments to manage foreign exchange fluctuations. Management believes the foreign exchange risk related to currency conversions is minimal.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has in place a planning and budgeting process to help determine the funds required to ensure the Company has the appropriate liquidity to meet its operating and growth objectives. The Company has historically relied on the issuance of shares and warrants to fund exploration programs and will require doing so again in the future.

14. EVENT AFTER REPORTING DATE

Subsequent to July 31, 2021, the Company granted 3,840,000 stock options to directors, officers, and employees of the Company with an exercise price of $0.60 per option with an expiry date of August 18, 2031.

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