Serrano Resources Ltd. — Interim / Quarterly Report 2022

Nov 25, 2021

Rumbu Holdings Ltd. Condensed Interim Financial Statements Three Months Ended September 30, 2021 (Expressed in Canadian Dollars) (Unaudited)

Notice of No Auditors Review of Interim Financial Statements

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed the unaudited condensed interim financial statements for the three-month period ended September 30, 2021 which have been prepared by and are the responsibility of the Company’s management.

Rumbu Holdings Ltd. Statement of Financial Position

As at September 30, 2021and June 30, 2021 (Expressed in Canadian Dollars)

(unaudited)

Note September 30, 2021	June 30, 2021
Assets Current Cash $ 88,062 Deferred financing costs 25,525 Subscription receivable 4 -	$ 46,485 25,525 57,990
Total assets $ 113,587	$ 130,000
Liabilities and Shareholders’ Equity Current Accounts payable and accruals $ **6,665 **	$ 11,054
Total liabilities **6,665 **	11,054
Shareholders' Equity Share capital 4 125,000 Deficit (18,078)	125,000 (6,054)
Total shareholders’ equity 106,922	118,946
Total liabilities and shareholders’ equity $ 113,587	$ 130,000

Subsequent event ( Note 8 )

Approved on behalf of the Board of Directors

“Ross O. Drysdale” “ J. Michael Sullivan” Ross Drysdale, Director, J. Michael Sullivan, Director, President and Chief Director Executive Officer

The accompanying notes are an integral part of these financial statements

Rumbu Holdings Ltd. Condensed Interim Statements of Loss and Comprehensive Loss For the Three Months Ended September 30, 2021 and 2020 (Expressed in Canadian Dollars) (unaudited)

Note	Three Months Ended Sept 30, 2021
Expenses Regulatory filing fees $ Professional fees Generaland administrative	8,642 3,225 **157 **
Loss and comprehensive loss $	12,024
Basic and diluted loss per common share $	(0.00)

The accompanying notes are an integral part of these financial statements

(Expressed in Canadian Dollars) (unaudited)

Rumbu Holdings Ltd. Statement of Changes in Shareholders’ Equity

		Share	Contributed		Shareholders’
		Capital	Surplus	Deficit	Equity
	Note	($)	($)	($)	($)
At incorporation, February 25,
2021		-	-	-	-
Issuance of common shares	4	125,000	-	-	125,000
Net loss and comprehensive loss		-	-	(6,054)	(6,054)
Balance at June 30, 2021		125,000	-	(6,054)	118,946
Net loss and comprehensive loss		-	-	(12,024)	(12,024)
Balance at September 30, 2021		125,000	-	(18,078)	106,922

The accompanying notes are an integral part of these financial statements

Rumbu Holdings Ltd. Statement of Cash Flows

For the Three Months Ended September 30, 2021 and 2020 (Expressed in Canadian Dollars) (unaudited)

			Three Months
			Ended Sept 30,
	Note		2021
Cash flows from operating activities:
Net loss		$	(12,024)
Change in non-cash working capital items:
Accounts payable and accruals			(4,389)
Cash flows used in operating activities			(16,413)
Cash flows from financing activities:
Proceeds from share issuance	4		-
Change in non-cash working capital items:
Deferred financing costs			-
Subscription receivable		$	57,990
Cash flows provided by financing activities			57,990
Increase in cash			41,577
Cash, beginning of period			46,485
Cash, end ofperiod		$	88,062

The accompanying notes are an integral part of these financial statements

Rumbu Holdings Ltd`. Notes to the Condensed Interim Financial Statements For the Three Months Ended September 30, 2021 (Expressed in Canadian Dollars)

1. NATURE OF OPERATIONS

Rumbu Holdings Ltd. (the "Company") was incorporated on February 25, 2021 by Certificate of Incorporation issued pursuant to the provisions of the Business Corporations Act (Alberta). The Company is classified as a Capital Pool Company (“CPC”) as defined in Policy 2.4 of the TSX Venture Exchange (the "Exchange").

The principal business of the Company is to identify and evaluate assets or businesses with a view to potentially acquire them or an interest therein by completing a purchase transaction, by exercising an option or by any concomitant transaction. The purpose of such an acquisition is to satisfy the related conditions of a qualifying transaction under the Exchange rules.

The proceeds raised from the issuance of share capital may only be used to identify and evaluate assets or businesses for future investment, and reasonable expenses relating to the Company’s initial public offering, general and administrative expenses (not exceeding in aggregate $3,000 per month) and relating to a proposed qualifying transaction. These restrictions may apply until completion of a Qualifying Transaction by the Company as defined under the policies of the Exchange.

The Company has not conducted commercial operations. The Company's continuing operations are dependent upon its ability to evaluate and negotiate an agreement to acquire an interest in a material asset or business. There is no assurance that the Company will be able to complete a Qualifying Transaction or that it will be able to secure the necessary financing to complete a Qualifying Transaction.

The head office and registered office of the Company is located at 1605, 400 Eau Claire Avenue SW, Calgary, Alberta, T2P 4X2.

2. BASIS OF PRESENTATION

Statement of compliance

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). Accordingly, they do not include all the information required for full annual financial statements and should be read in conjunction with the audited financial statements for the year ended June 30, 2021. The accounting policies adopted are consistent with those of the previous financial year ad the corresponding interim reporting period.

These financial statements were authorized for issue in accordance with a resolution of the directors on November 25, 2021.

Basis of measurement

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

3. SIGNIFICANT ACCOUNTING POLICIES

Deferred financing costs

Financing costs related to proposed financings are recorded as deferred financing costs. These costs are deferred until the financing is completed at which time the costs are charged against the proceeds received. If the financing does not close, the costs are charged to operations.

Share-based payments

The Company applies a fair value-based method of accounting to all share-based payments. Employee and director stock options are measured at the fair value of each tranche on the grant date and recognized over its respective vesting period. Non-employee stock options are measured based on the service provided to the reporting date and at their then-current fair values. The cost of stock options is presented as share-based compensation expense when applicable with a corresponding credit to contributed surplus. On the exercise of stock options, share capital is credited for consideration received and for fair value amounts previously credited to contributed surplus. The Company uses the Black-Scholes option pricing model to estimate the fair value of sharebased payments.

Rumbu Holdings Ltd. Notes to the Condensed Interim Financial Statements For the Three Months Ended September 30, 2021 (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES, continued

Financial Instruments

Classification and measurement of financial instruments

The Company measures its financial assets and financial liabilities at fair value on initial recognition, which is typically the transaction price unless a financial instrument contains a significant financing component. Subsequent measurement is dependent on the financial instrument’s classification which in the case of financial assets, is determined by the context of the Company’s business model and the contractual cash flow characteristics of the financial asset. Financial assets are classified into two categories: (1) measured at amortized cost and (2) fair value through profit and loss (“FVTPL”). Financial liabilities are subsequently measured at amortized cost, other than financial liabilities that are measured at FVTPL or designated as FVTPL where any change in fair value resulting from an entity’s own credit risk is recorded as other comprehensive income (“OCI”). The Company does not employ hedge accounting for its risk management contracts currently in place.

Amortized cost

The Company classifies its cash, subscriptions receivable and accounts payable and accruals as measured at amortized cost. The contractual cash flows received from the financial assets are solely payments of principal and interest and are held within a business model whose objective is to collect the contractual cash flows. These financial assets and financial liabilities are subsequently measured at amortized cost using the effective interest method.

Impairment of financial assets

The measurement of impairment of financial assets is based on expected credit losses. Accounts receivable that are considered collectible within one year or less are not considered to have a significant financing component and a lifetime expected credit loss (“ECL”) is measured at the date of initial recognition of the receivable.

The Company applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which requires the use of the lifetime expected loss provision for all trade receivables. In estimating the lifetime expected loss provision, the Company will consider historical industry default rates as well as credit ratings of major customers. The Company does not currently have any financial assets subject to this approach.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Income taxes

Income taxes are calculated using the liability method of tax allocation accounting. Temporary differences arising from the difference between the tax basis of an asset or liability and its carrying value on the statement of financial position are used to calculate deferred income tax liabilities or assets. Deferred income tax liabilities or assets are calculated using tax rates anticipated to apply in the periods that the temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Accounting standards issued but not yet adopted

The new accounting standards and amendments to existing standards that have been issued and that the Company will be required to adopt in future years are either not applicable or are not expected to have a significant impact on the Company’s financial statements.

Rumbu Holdings Ltd. Notes to the Condensed Interim Financial Statements For the Three Months Ended September 30, 2021 (Expressed in Canadian Dollars)

4. SHARE CAPITAL

Authorized:

Unlimited number of common shares and preferred shares, issuable in series.

Issued:
Common Shares
	Number of Shares	$
Issued at incorporation	-	-
Issued at $0.05 per share	2,500,000	125,000
As at June 30,2021 and September 30,2021	2,500,000	125,000

On September 28, 2021, the Company filed a Preliminary Prospectus with the Exchange with the intent of completing a public offering of 4,000,000 common shares at a price of $0.10 per share (the “Offering”). The Company entered into an agreement with PI Financial Corp. (the “Agent”), whereby the Company will pay a corporate finance fee of $10,000 plus applicable taxes, reimburse for Agent’s expenditures related to the offering, and commission equal to 10% of the total proceeds raised in the Offering. In addition, the Company will grant the Agent warrants (the “Agent’s Warrants”) in an amount equal to 10% of the common shares issued pursuant to the Offering at a price of $0.10 per share which will be exercisable for a period of twenty four (24) months from the date of listing of the common Shares on the Exchange. The completion of the listing and the offering are subject to the Company fulfilling and meeting the requirements of the Exchange. As of September 30, 2021, total cost incurred in association with the proposed Offering was $23,078.

In conjunction with closing of the Offering, the Company will grant 650,000 options under the Company’s stock option plan to directors and officers of the Company. The options, which vest immediately, may be exercised at a price of $0.10 per common share for a period of ten years from the date of the agreement.

Upon completion of the Company’s initial public offering, all common shares issued are held in escrow until completion of a Qualifying Transaction. 25% of these common shares will be released on the issuance of the Final Exchange Bulletin and an additional 25% will be released on each 6-month anniversary from the initial release.

These common shares, which are considered contingently issuable until the Company completes a Qualifying Transaction, are not considered to be outstanding for the purpose of the loss per share calculation.

Stock options

The Company has adopted an incentive stock option plan (the “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 requirements, grant to directors, officers and technical consultants to the Company and Eligible Charitable Organizations, nontransferable 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 as at the date of grant of any such option, and that the exercise period does not exceed 10 years from the date of grant.

The number of Common Shares issuable to any individual director or officer will not exceed 5% of the issued and outstanding Common Shares of the Company as at the date of grant of such option. The number of Common Shares issuable at any given time to all technical consultants in aggregate will not exceed 2% of the issued and outstanding Common Shares of the Company as at the date of grant of such option.

As at September 30, 2021, no stock options have been granted.

Rumbu Holdings Ltd. Notes to the Condensed Interim Financial Statements For the Three Months Ended September 30, 2021 (Expressed in Canadian Dollars)

5. RELATED PARTY TRANSACTIONS

During the period ended September 30, 2021, a total of $5,000 was paid to the President and a director of the Company and $2,500 was paid to the CFO of the Company and these amounts are included in the accounts payable and accruals.

6. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

The Company, as part of its operations, carries financial instruments consisting of cash, subscriptions receivable and accounts payable and accruals. It is management's opinion that the Company is not exposed to significant credit, interest, or currency risks arising from these financial instruments except as otherwise disclosed.

Fair value

Fair value represents the price at which a financial instrument could be exchanged in an orderly market, in an arm's length transaction between knowledgeable and willing parties who are under no compulsion to act. The Company classifies the fair value of the financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instrument.

Level 1: Fair value measurements are those derived from quoted prices (unadjusted) in the active market for identical assets or liabilities.

• Level 2: Fair value measurements are those derived from inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (derived from prices).

• Level 3: Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.

The carrying amount of cash, subscriptions receivable and account payable and accruals approximates its fair value due to the short-term maturities of these items.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they come due. As at September 30, 2021, the Company has cash of $88,062 to satisfy obligations of $6,665 as they come due, as such, is not exposed to significant liquidity risk.

7. CAPITAL MANAGEMENT

The Company’s capital consists of share capital. The Company’s objective for managing capital is to maintain sufficient capital to identify, evaluate and complete an acquisition or other transaction as disclosed in Note 1. The Company sets the amount of capital in relation to risk and manages the capital structure and makes adjustments to it in light of changes to economic conditions and the risk characteristics of the underlying assets. The Company’s objectives when managing capital are:

• i. to maintain a flexible capital structure, which optimizes the cost of capital at acceptable risk; and, ii. to maintain investor, creditor and market confidence in order to sustain the future development of the business.

The Company is not subject to any externally or internally imposed capital requirements at period-end apart from the requirements of the Exchange.

Rumbu Holdings Ltd. Notes to the Condensed Interim Financial Statements For the Three Months Ended September 30, 2021 (Expressed in Canadian Dollars)

8. COVID-19

The novel coronavirus (“COVID-19”) outbreak was declared a pandemic by the World Health Organization on March 11, 2020. This has resulted in significant economic uncertainty and governments worldwide are enacting emergency measures to contain the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global financial markets have experienced significant volatility and weakness as a consequence of this economic uncertainty. The duration and impact of the COVID-19 outbreak is unknown as this time, as is the effectiveness of interventions by governments and central banks. The full extent of the impact on the Company’s future financial results is uncertain given the length and severity of these developments cannot be reliably estimated.