Quadro Resources Ltd. — Interim / Quarterly Report 2020

Mar 23, 2020

QUADRO RESOURCES LTD.

CONDENSED INTERIM FINANCIAL STATEMENTS

Six Months Ended January 31, 2020

(Unaudited – Prepared by Management)

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL REPORT

The accompanying unaudited interim financial report of the Company has been prepared by and is the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of this financial report.

QUADRO RESOURCES LTD. INTERIM STATEMENTS OF FINANCIAL POSITION

(Unaudited – Prepared by Management)

			January 31,		July 31,
	Note		2020		2019
ASSETS
Current assets
Cash		$	618,764	$	161,105
Receivables	4, 8		46,262		38,279
Prepaid expenses	8		6,885		15,285
			671,911		214,669
Non-current assets
Exploration and evaluation assets	6		1,417,423		1,394,945
Equipment	5		1,910		-
			1,419,333		1,394,945
Total assets		$	2,091,244	$	1,609,614
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade and other payables	7	$	81,977	$	94,185
Amounts due to related parties	8		7,471		5,000
Total liabilities			89,448		99,185
Shareholders’ equity
Share capital	9		12,496,364		11,907,811
Share subscription receivable	9		(5,000)		-
Share-based payments reserve	10		838,325		835,996
Deficit			(11,327,893)		(11,233,378)
Total shareholders’ equity			2,001,796		1,510,429
Total liabilities and shareholders’ equity		$	2,091,244	$	1,609,614

Nature of business and going concern (Note 1) Commitments (Note 6)

The financial statements were authorized for issue by the Board of Directors on March 23, 2020 and were signed on its behalf by:

Director

Director

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

QUADRO RESOURCES LTD. INTERIM STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited – Prepared by Management)

		Three Months	Three Months	Three Months	Three Months		Six Months		Six Months
			Ended		Ended		Ended		Ended
			January 31,		January 31,		January 31,		January 31,
	Note		2020		2019		2020		2019
EXPENSES
Accounting and audit		$	8,889	$	2,500	$	10,389	$	4,000
Administrative			5,307		1,724		5,636		2,555
Depreciation			137		-		273		-
Management fees	8		32,500		24,000		56,500		48,000
Office and miscellaneous			2,627		574		3,040		2,439
Rent			2,625		2,625		5,250		5,250
Share-based payments			-		13,895		-		35,481
Transfer agent and regulatory fees			4,587		2,835		5,265		3,486
Travel and promotion			6,133		3,827		8,162		7,090
Net and comprehensive loss for the period			(62,805)		(51,980)		(94,515)		(108,301)
Basic and diluted loss per common share	9	$	(0.00)	$	(0.00)	$	(0.00)	$	(0.00)
Weighted average number of common			29,321,659		27,427,094		28,624,377		27,740,681
shares outstanding

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

QUADRO RESOURCES LTD.

INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIENCY) (Unaudited – Prepared by Management)

									Total
					Share		Share-based		shareholders’
		Number			subscription		payments		equity
	Note	of shares	Share capital		receivable		reserve	Deficit	(deficiency)
Balance, July 31, 2019		27,927,094	$ 11,907,811	$	-	$	835,996	$ (11,233,378) $	1,510,429
Flow-through private placement	9	2,575,000	128,750		-		-	-	128,750
Non-flow-through private placement	9	8,825,000	441,250		(5,000)		-	-	436,250
Share issuance costs	9	-	(11,447)		-		2,329	-	(9,118)
Acquisition of exploration and evaluation assets	9	500,000	30,000		-		-	-	30,000
Comprehensive loss for the period		-	-		-		-	(94,515)	(94,915)
Balance,January31,2020		27,927,094	$12,496,364	$	(5,000)	$	838,325	$ (11,327,893) $	2,001,796

					Share-based				Total
		Number			payments				shareholders’
	Note	ofshares	Share capital		reserve		Deficit		equity
Balance, July 31, 2018		27,427,094	$ 11,886,311	$	789,228	$	(10,919,221)	$	1,756,318
Share-based payments	9	-	-		35,481		-		-
Acquisition of exploration and evaluation assets	9	500,000	21,500		-		-		-
Comprehensive loss for the period		-	-		-		-		(108,301)
Balance, January 31,2019		27,927,094	$11,907,811	$	824,709	$	-	$	(11,027,522)

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

QUADRO RESOURCES LTD. INTERIM STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JANUARY 31

(Unaudited – Prepared by Management)

	Note		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for theperiod		$	(94,515)	$	(108,301)
Item not affecting cash:
Depreciation			273		-
Share-based payments			-		35,481
Changes in non-cash working capital items:
Receivables			(7,983)		41,304
Prepaid expenses			8,400		6,115
Trade and other payables			(10,138)		(1,904)
Amounts due to related parties			2,471		-
Net cash used in operating activities			(101,492)		(27,305)
CASH FLOWS FROM INVESTING ACTIVITIES
Exploration and evaluation assets			(18,275)		(260,666)
Government grant received			23,727		-
Purchase of equipment			(2,183)		-
Net cash provided by (used in) investing activities			3,269		(260,666)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of share capital			565,000		-
Share issuance costs			(9,118)		-
Net cash provided by financing activities			555,882		-
Change in cash during the period			457,659		(287,971)
Cash, beginning of the period			161,105		522,702
Cash, end of the period		$	618,764	$	234,731

Supplemental disclosures with respect to cash flows (Note 11)

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

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

1. NATURE OF BUSINESS AND GOING CONCERN

Quadro Resources Ltd. (the "Company") was incorporated under the laws of British Columbia, Canada and maintains its head office and registered office at Suite 1500, 1040 West Georgia Street, Vancouver, British Columbia, Canada, V6E 4H8. The Company is primarily engaged in the acquisition, exploration and development of exploration and evaluation assets in Canada. The Company is listed on the TSX Venture Exchange (TSX-V) under the symbol “QRO”.

Going concern

These financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes 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.

In order to continue as a going concern and meet its corporate objectives, the Company will require additional financing through debt or equity issuances or other available means. Although the Company has been successful in the past in obtaining financing, there is no assurance that the Company will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to the Company.

At present, the Company’s operations do not generate cash flow. The Company has incurred losses since inception and had an accumulated deficit of $11,327,893 as at January 31, 2020 and a working capital of $582,463, all of which may cast significant doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to raise adequate financing, identify economically recoverable reserves and to commence profitable operations in the future.

These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue its existence. These adjustments could be material.

2. BASIS OF PREPARATION

These condensed interim financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34 Interim Financial Reporting . The condensed interim financial statements do not include all of the disclosures required for a complete set of annual financial statements and should be read in conjunction with the annual financial statements for the year ended July 31, 2019, which have been prepared in accordance with IFRS as issued by the IASB.

Basis of measurement

These financial statements have been prepared on a historical cost basis except for certain financial instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

Functional and presentation currency

These financial statements are presented in Canadian dollars, which is the Company’s functional currency.

2. BASIS OF PREPARATION (cont’d…)

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

Significant estimates and assumptions

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the period. Actual results could differ from these estimates. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised. Significant areas requiring the use of management estimates include:

• i) The determination of the fair value of stock options and warrants using stock pricing models, require the input of highly subjective assumptions, including the expected price volatility. Changes in the subjective input assumptions could materially affect the fair value estimate; therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options and warrants.

• ii) The determination of deferred income tax assets or liabilities requires subjective assumptions regarding future income tax rates and the likelihood of utilizing tax carry-forwards. Changes in these assumptions could materially affect the recorded amounts, and therefore do not necessarily provide certainty as to their recorded values.

• iii) Recorded costs of flow-through share premium liabilities reflect the premium received by the Company on the issue of flow-through shares. The premium is subject to measurement uncertainly and requires the Company to assess the value of non-flow through shares. This determination is subjective and does not necessarily provide a reliable single measure of the fair value of the premium liability.

• iv) Option or sale agreements, under which the Company may receive shares as payment, require the Company to determine the fair value of the shares received. Many factors can enter into this determination, including, if public shares, the number of shares received, the trading value of the shares, and volume of shares, and if non-public shares, the underlying asset value of the shares, or value of the claims under option or sale. This determination is subjective and does not necessarily provide a reliable single measure of the fair value of the shares received.

Significant judgments

The preparation of these financial statements requires management to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s financial statements include:

• i) Recorded costs of mineral property interests and deferred exploration and evaluation costs are not intended to reflect present or future values of these properties. The recorded costs are subject to measurement uncertainty and it is reasonably possible, based on existing knowledge, that change in future conditions could require a material change in the recognized amount. Management is required, at each reporting date, to review its mineral property interests for signs of impairment. This is a highly subjective process taking into consideration exploration results, metal prices, economics, financing prospects and sale or option prospects. Management makes these judgments based on information available, but there is no certainty that a property is or is not impaired.

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.

2. BASIS OF PREPARATION (cont’d…)

Significant judgments (cont’d…)

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

• ii) The assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty.

• iii) The classification of financial instruments.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out in the Company’s annual financial statements for the year ended July 31, 2019 were consistently applied to all the periods presented unless otherwise noted below.

Comparative information

Certain comparative information in these interim consolidated financial statements has been reclassified to conform to the presentation of the current period financial statements.

New accounting policies

IFRS 16 – Leases

IFRS 16 – Leases (“IFRS 16”) is a new standard that sets out the principles for recognition, measurement, presentation, and disclosure of leases including guidance for both parties to a contract: the lessee and the lessor. IFRS 16 eliminates the classification of leases as either operating or finance leases, as is currently required by IAS 17 – Leases, and instead introduces a single lessee accounting model. This standard was effective for years beginning on or after January 1, 2019. The Company does not have any leases and thus has no significant impact of adopting IFRS 16 on its financial statements.

4. RECEIVABLES

			January 31,	July 31,
			2020	2019
Sales	tax recoverable	$	37,712 $	32,035
Rent	recoverable		8,550	6,244
		$	46,262 $	38,279

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

5. EQUIPMENT

		Computer
		equipment
Cost
Balance as at July 31, 2019	$	0
Addition		2,183
Balance as at January 31, 2020		2,182
Accumulated depreciation
Balance as at July 31, 2019		0
Depreciation for the period		273
Balance as at January 31, 2020		273
Net book value as at January 31, 2020	$	1,910

6. EXPLORATION AND EVALUATION ASSETS

		Long Lake		Staghorn
		Property		Property		Other		Total
Acquisition costs
Option payments	$	40,000	$	-	$	-	$	40,000
Deferred exploration expenditures
Assaying		-		598		-		598
Geological consulting		-		3,035		-		3,035
Miscellaneous		-		2,450		-		2,450
Travel		-		122		-		122
Government grant adjustment		-		(23,727)		-		(23,727)
Net costs for the period		40,000		(17,522)		-		22,478
Balance, beginning of the year		-		1,373,768		21,177		1,394,945
Balance, January 31, 2020	$	40,000	$	1,356,246	$	21,177	$	1,417,423

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

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

		Staghorn		Conche
		Property		Property		Other		Total
Acquisition costs
Option payments	$	3,500	$	18,000	$	-	$	21,500
Claim staking/maintenance costs		1,158		-		-		1,158
		4,658		18,000		-		22,658
Deferred exploration expenditures
Assaying		8,963		-		-		8,963
Drilling		111,153		-		-		111,153
Equipment rental		19,010		2,095		-		21,105
Geological consulting		80,408		2,725		-		83,133
Miscellaneous		86		-		-		86
Travel		26,771		701		-		27,472
Government grant received		(62,536)		-		-		(62,536)
		183,855		5,521		-		189,376
Net costs for the year		188,513		23,521		-		212,034
Write-off of property costs		(21,000)		(26,186)		-		(47,186)
Balance, beginning of the year		1,206,255		2,665		21,177		1,230,097
Balance, July 31, 2019	$	1,373,768	$	-	$	21,177	$	1,394,945

Staghorn Property, Newfoundland and Labrador

On June 6, 2017, the Company entered into an option agreement with Metals Creek Resources Corp. (“Metals Creek”) and Benton Resources Inc. (“Benton”) whereby the Company was granted an option to acquire a 100% interest in the Staghorn property, located in Newfoundland and Labrador, as well as all their rights to the Rose Gold property which is comprised of certain mineral claims contiguous to the Staghorn property. The Company issued 8,000,000 common shares (with a fair value of $800,000) to Metals Creek and Benton and earned a 100% interest in the Staghorn property.

To earn a 100% interest in the Rose Gold property, the Company is required to make cash payments of $42,500 ($12,500 paid) and issue 450,000 common shares (150,000 common shares issued with a fair value of $8,500) over a three year period. During the year ended July 31, 2019, the Company decided not to proceed with the Rose Gold option agreement and accordingly wrote off the capitalized acquisition costs of $21,000.

The Staghorn property is subject to NSR royalties as outlined below:

• A royalty granted to Metals Creek and Benton representing a 3 kilometer area of interest that is subject to a 3% NSR in favour of Metals Creek and Benton, of which a 2% NSR can be purchased by the Company at any time for $2,000,000.

• An existing royalty held by Ed Northcott and Gilbert Lushman representing a 3 kilometer area of interest that is subject to: i) a 2% NSR in favour of Ed Northcott and Gilbert Lushman, of which a 1% NSR can be purchased by the Company at any time for $1,000,000; and (ii) a 1% NSR in favour of Metals Creek and Benton.

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

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

Long Lake Property, Newfoundland and Labrador

In November 2019, the Company entered into an option agreement to acquire a 100% interest in the Long Lake property, located in Newfoundland and Labrador by making staged cash payments totaling $100,000 over three years ($10,000 paid) and share issuances totaling 5,000,000 common shares over three years (500,000 shares issued with a fair value of $30,000). The Long Lake property is subject to a 2% NSR, half of which can be purchased by the Company for $1,500,000.

Conche Property, Newfoundland and Labrador

During the year ended July 31, 2018, the Company acquired a one-third interest in the Conche property on the Great Northern Peninsula, Newfoundland and Labrador by staking.

On July 3, 2018, the Company entered into an option agreement with Metals Creek and Benton, whereby the Company has an option to acquire a one-third interest held by each of Metals Creek and Benton in the Conche property. To exercise the option, the Company is required to issue one million shares to each of Metals Creek and Benton over an 18-month period (400,000 common shares issued with a fair value of $18,000). Based on the initial exploration results, the Company decided not to proceed with the option agreement and accordingly wrote off the capitalized acquisition and exploration costs of $26,186 during the year ended July 31, 2019.

Other properties, Newfoundland and Labrador

During the year ended July 31, 2018, the Company staked two claim blocks totaling 122 claim units in the St. Anthony area on the Great Northern Peninsula, Newfoundland and Labrador for $21,177.

7. TRADE AND OTHER PAYABLES

		January 31,	July 31,
		2020	2019
Trade payables	$	10,977 $	11,185
Accrued expenses		71,000	83,000
	$	81,977$	94,185

Trade payables of the Company are principally comprised of amounts outstanding for trade purchases relating to operating activities. The usual credit period taken for trade purchases is between 30 to 90 days.

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

8. RELATED PARTY TRANSACTIONS

Amounts due to related parties are unsecured, non-interest bearing, and have no specific terms of repayment.

Included in receivables are $8,550 (July 31, 2019 - $6,244) of rental payment due from a sublease office tenant with an officer in common with the Company.

Included in prepaid expenses are $nil (July 31, 2019 - $8,400) of management fees advanced to the President and Chief Financial Officer of the Company.

Key management personnel include directors (executive and non-executive) and officers of the Company. The compensation paid or payable to key management personnel during the six month periods ended January 31 is as follows:

		2020	2019
Management fees	$	56,500 $	48,000
Share-based payments		-	28,658

The Company entered into the following related party transactions during the six months ended January 31, 2020:

• a) Paid or accrued management fees of $42,000 (2019 - $36,000) to a company controlled by the President of the Company for management services provided.

• b) Paid or accrued management fees of $14,500 (2019 - $12,000) to the Chief Financial Officer of the Company for management services provided.

9. SHARE CAPITAL

Authorized share capital

The Company has authorized an unlimited number of common shares with no par value.

Issued share capital

At January 31, 2020, the Company had 39,827,094 common shares issued and outstanding (July 31, 2019 - 27,927,094).

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

9. SHARE CAPITAL

Share issuance

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

• i) Completed a private placement of 8,825,000 non-flow-through units at a price of $0.05 per non-flow-through unit and 2,575,000 flow-through units at a price of $0.05 per flow-through unit for gross proceeds of $570,000, of which $5,000 was received subsequent to January 31, 2020. Each non-flow-through unit is comprised of one common share and one share purchase warrant; each warrant entitles the holder to acquire one additional common share for a period of 12 months at a price of $0.05. Each flow-through unit is comprised of one common share and one of a share purchase warrant; each warrant entitles the holder to acquire one additional common share for a period of 12 months at a price of $0.05. There was no value assigned to the warrant component of the units. In connection with the private placement, the Company paid finders’ fees consisting of $4,550 in cash and 91,000 warrants which have the same terms as the warrants issued with the private placement units. The agent’s warrants were valued at $2,329 using the Black-Scholes option pricing model (assuming a risk-free interest rate of 1.67%, an expected life of 1 year, annualized volatility of 106% and a dividend rate of 0%). The Company also incurred filing expenses and other share issuance costs of $4,568 in connection with the private placement. There was no premium received by the Company on issuance of the flow-through shares.

• ii) Issued 500,000 common shares pursuant to the Long Lake option agreement (Note 5) with a fair value of $30,000.

During the year ended July 31, 2019, the Company:

• i) Issued 400,000 common shares pursuant to the Conche property agreement (Note 5) with a fair value of $18,000.

• ii) Issued 100,000 common shares pursuant to the Rose Gold property agreement (Note 5) with a fair value of $3,500.

Basic and diluted loss per share

The calculation of basic and diluted loss per share for the six months ended January 31, 2020 was based on the loss attributable to common shareholders of $94,515 (2019 - $108,301) and a weighted average number of common shares outstanding of 28,624,377 (2019 - 27,740,681).

10. SHARE-BASED PAYMENTS

Stock options

The Company has adopted an incentive rolling stock option plan (the “Plan”) under which it is authorized to grant options to directors, officers, employees and consultants enabling them to acquire up to a maximum of 20% of the total number of issued and outstanding shares of the Company. The options can be granted for a maximum term of 5 years and vest as determined by the board of directors. The exercise price of options granted under the Plan shall not be less than the closing price of the Company’s shares on the trading day immediately preceding the date of grant, less the discount permitted under the Exchange’s policies.

The Company had no stock option transactions during the year ended July 31, 2019 and the six months ended January 31, 2020. The options outstanding at January 31, 2020 have an exercise price of $0.10 and a weighted average remaining contractual life of 2.97 years.

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

10. SHARE-BASED PAYMENTS

Warrants

The Company uses the residual value method with respect to the measurement of share purchase warrants issued with private placement units. The proceeds from the issue of units is allocated between common shares and share purchase warrants on residual value basis, wherein the fair value of the common shares is based on the market value on the date of the announcement of the placement and the balance, if any, is allocated to the attached warrants. Agents’ warrants are measured at fair value on the date of the grant as determined using the Black-Scholes option pricing model.

Warrant transactions are summarized as follows:

			Weighted
			Average
	Number		Exercise
	of Warrants		Price
Balance, July 31, 2018	11,126,160	$	0.16
Warrants expired	(11,126,160)		0.16
Balance, July 31, 2019	-	$	-
Warrants granted	11,400,000		0.05
Agents’warrants granted	91,000		0.05
Balance, January31,2020	11,491,000	$	0.05

The warrants outstanding at January 31, 2020 have an exercise price of $0.05 and a weighted average remaining contractual life of 0.98 year.

As at January 31, 2020, the following warrants were outstanding:

Number
of Warrants	Exercise Price	Expiry Date
2,657,250	$ 0.05	December 31, 2020
8,833,750	$ 0.05	January 28, 2021
11,491,000

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

11. SUPPLEMENTAL CASH FLOW INFORMATION

Significant non-cash investing and financing transactions during the six months ended January 31, 2020 included:

• a) The Company issued 500,000 common shares pursuant to mineral property agreements with a total value of $30,000.

• b) Included in trade and other payables are $1,921 related to exploration and evaluation assets.

Significant non-cash investing and financing transactions during the six months ended January 31, 2019 included:

• a) The Company issued 500,000 common shares pursuant to mineral property agreements with a total value of $21,500.

• b) Included in trade and other payables are $6,170 related to exploration and evaluation assets.

12. CAPITAL MANAGEMENT

The Company's objective when managing capital is to ensure adequate working capital is available to fund both the business development plans and the working capital requirements of each annual operating cycle. In the management of capital, the Company includes shareholders’ equity (deficiency) in the definition of capital.

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. To maintain or adjust its capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets. The Board of Directors does not establish quantitative return on capital criteria for management.

There were no changes in the Company's approach to capital management from the prior year. The Company is not subject to externally-imposed capital requirements.

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

13. FINANCIAL INSTRUMENTS AND RISK

With the adoption of IFRS 9, the Company has classified cash as FVTPL, and receivables, trade and other payables and amounts due to related parties at amortized cost.

As of July 31, 2019 and January 31, 2020, the carrying amounts of receivables, trade and other payables, and amounts due to related parties carried at amortized cost are considered a reasonable approximation of their fair values due to the relatively short period to maturity of these financial instruments.

Financial risk management

The Company’s financial risks arising from its financial instruments are credit risk, liquidity risk, and interest rate risk. The Company’s exposures to these risks and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

Credit risk is the risk of potential loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The credit risk of the Company is associated with its cash. The credit risk with respect to its cash is minimal as they are held with high-credit quality financial institutions. The Company’s receivables consist of rental recovery due from a sublease office tenant and sales tax recoverable due from the Canadian government. Management does not expect these counterparties to fail to meet their obligations.

Liquidity risk

Liquidity risk is the risk that the Company will not meet its financial obligations as they fall due. The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at January 31, 2020, the Company had a cash balance of $618,764 to settle trade and other payables of $81,977 and due to related parties of $7,471. The Company’s trade and other payables have contractual maturities of 30 days or are due on demand and are subject to normal trade terms.

At present, the Company’s operations do not generate positive cash flows. The Company's primary source of funding has been the issuance of equity securities through private placements and the exercise of stock options and warrants. Despite previous success in acquiring these financings, there is no guarantee of obtaining future financings.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Current financial assets and financial liabilities are generally not exposed to interest rate risk because of their short-term maturity.

QUADRO RESOURCES LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED JANUARY 31, 2020 (Unaudited – Prepared by Management)

14. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data or other means. Level 3 inputs are unobservable (supported by little or no market activity). The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.

Financial instruments measured at fair value on the statement of financial position are summarized in levels of fair value hierarchy as follows. There have been no changes in these levels and no changes in classifications during the the six months ended January 31, 2020.

		Level 1		Level 2		Level 3		Total
January 31, 2020
Cash	$	618,764	$	-	$	-	$	618,764
July 31, 2019
Cash	$	161,105	$	-	$	-	$	161,105

15. EVENT AFTER THE REPORTING PERIOD

Subsequent to January 31, 2020, the Company entered into a letter of intent (“LOI”) to acquire a 70% interest in the Seagull Lake property near Thunder Bay, Ontario, by making staged cash payments totaling $275,000, issuing 6,500,000 common shares and spending $1,550,000 of exploration expenditures over three years. Upon the Company earning the 70% interest, the Company and the optionor will form a joint venture for the further development of the property.