Surface Metals Inc. — Interim / Quarterly Report 2020

May 29, 2020

HAPUNA VENTURES INC.

UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

(Prepared by Management)

SIX-MONTH PERIOD ENDED MARCH 31, 2020

Notice of No Auditor Review of Condensed Interim Financial Statements

The accompanying unaudited condensed interim financial statements have been prepared by management and approved by the Audit Committee and the Board of Directors.

The Company’s independent auditors have not performed a review of these condensed interim financial statements in accordance with the standards established for a review of interim financial statements by an entity’s auditors.

The Accompanying Notes are an Integral Part of the Financial Statements

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HAPUNA VENTURES INC.

UNAUDITED INTERIM STATEMENTS OF FINANCIAL POSITION

AS AT MARCH 31, 2020

(Expressed in Canadian dollars

Note Assets Current Assets Cash and cash equivalents Accounts receivable 4 Due from ACT360 9 Customer lists and intangible assets 5 Liabilitites Current Liabilities Bank indebtedness Accounts payable and accrued liabilities Shareholder loan 9 Due to Kona Bay 9 Promisory note payable 6 Shareholders' Equity Share Capital 7 Deficit Total Equity (Deficiency) Total Liabilities and Shareholders' Equity	March 31, 2020 6,807 $ 4,493 41,741 53,041 1 53,042 $ - $ 407,602 14,800 184,434 606,836 369,824 976,660 269,997 (1,193,615) (923,618) 53,042 $	September 30, 2019 - $ 9,144 40,670
		49,814 1
		49,815 $
		471 $ 287,922 - 143,484
		431,877 360,048
		791,925
		269,997 (1,012,107)
		(742,110)
		49,815 $

APPROVED ON BEHALF OF THE BOARD OF DIRECTORS ON MAY 27, 2020

"Charles Jenkins" "Vincent Wong" Director Director

The Accompanying Notes are an Integral Part of the Financial Statements

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HAPUNA VENTURES INC.

UNAUDITED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2020 AND 2019

(Expressed in Canadian dollars)

Period ended March 31, 2020 Note Sales 12,948 $ Expenses Accounting and legal 9 12,409 $ Advertsing and promotion 9,467 Consulting 9, 10 60,000 Interest expense 6 5,016 Management fees 9 15,000 Regulator and filing fees 4,679 Selling office and general 102 Wages and benefits 9 3,428 110,101 Net and comprehensive income (loss) for the period (97,153) $ Earnings (loss) per share (0.02) $ Weighed average number of common shares outstanding 4,295,398	Period ended March 31, 2019 14,126 $ 3,442 $ - 60,000 4,875 15,000 3,837 9,392 12,893 109,439 (95,313) $ (0.02) $ 4,195,398	Period ended March 31, 2020 26,359 $ 17,909 $ 20,728 120,000 10,046 30,000 4,679 154 4,351 207,867 (181,508) $ (0.04) $ 4,295,398	Period ended March 31, 2019 31,226 $ 16,150 $ - 120,000 9,750 30,000 5,828 32,317 21,001
			235,046
			(203,820) $
			(0.05) $
			3,963,018

The Accompanying Notes are an Integral Part of the Financial Statements

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HAPUNA VENTURES INC.

UNAUDITED INTERIM STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2020 AND 2019

(Expressed in Canadian dollars)

Operating Activities Net income (loss) for the period Items not involving cash Interest on note payable Changes in assets and liabilities Accounts receivable Accounts payable and accrued liabilities Cash used in operating activities - continuing operations Financing Activities Shareholder loans Share subscriptions Issuance of common stock Cash provided by financing activities Net change in cash and cash equivalents Cash and cash equivalents (bank indebtedness), beginning balance Cash and cash equivalents (bank indebtedness), ending balance	2020 (181,508) $ 9,776 3,580 160,630 (7,522) 14,800 - - 14,800 7,278 (471) 6,807 $	2019 (203,820) $ 9,750 (9,911) 162,363
		(41,618)
		- (50,000) 81,333
		31,333
		(10,285) 13,431
		3,146 $

The Accompanying Notes are an Integral Part of the Financial Statements

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HAPUNA VENTURES INC.

UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY

FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2020 AND 2019

(Expressed in Canadian dollars)

Balance at September 30, 2018 Private placement Loss for the period Balance at March 31, 2019 Private placement Share issuance costs Loss for the period Balance at September 30, 2019 Loss for the period Balance at March 31, 2020	Number of Shares Amount Share subscriptions Deficit Total Shareholders' Equity Share Capital
	3,382,068 179,501 $ 60,000 $ (614,615) $ (375,114) $ 813,330 81,333 (50,000) - 31,333 - - - (203,820) (203,820)
	4,195,398 260,834 $ 10,000 $ (818,434) $ (547,601) $
	100,000 10,000 (10,000) - - - (837) - - (837) - - - (193,673) (193,673)
	4,295,398 269,997 $ - $ (1,012,107) $ (742,110) $
	(181,508) (181,508)
	4,295,398 269,997 $ - $ (1,193,615) $ (923,618) $

The Accompanying Notes are an Integral Part of the Financial Statements

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HAPUNA VENTURES INC. NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2020

(Expressed in Canadian dollars)

1. CORPORATE INFORMATION AND NATURE OF OPERATIONS

Hapuna Ventures Inc. (the “Company”) was incorporated under the provisions of the Company Act of British Columbia on January 31, 2017, as a wholly-owned subsidiary of Kona Bay Technologies Inc. (“Kona Bay”).

The Company is a technology company specializing in digital customer acquisition. Its customers are primarily higher education institutions that promote campus and online degree programs to consumers through digital media such as websites, mobile apps, social media networks and direct e-mail. The address of the Company’s corporate office and its principal place of business is 8186 200 – 375 Water Street, Vancouver, BC, V6B 0M9.

On February 28, 2017, the Company entered into an Arrangement Agreement (the “Agreement”) with Kona Bay, ACT360 Media Ltd. (“ACT360”) and Bexar Ventures Inc. (“Bexar”) for the purposes of carrying out a corporate restructuring by way of a Plan of Arrangement (the “Arrangement” or the “POA”) pursuant to Section 288 of the Business Corporations Act (British Columbia). On December 13, 2017, the POA closed and the online advertising assets were transferred to the Company by Kona Bay and ACT360. In conjunction with the closing of the POA, the Company consolidated its common shares on the basis of one post-consolidation common share for every three pre-consolidation common shares. On December 14, 2017, Kona Bay exchanged the 4,761,199 common shares of the Company for the Class A shares outstanding as of December 13, 2017. The Company has not yet obtained a listing on a Canadian stock exchange.

Potential impact of the Pandemic on Corporate Operations and Activities

During March 2020, there was a global outbreak of COVID-19 (Coronavirus), which has had a significant impact on businesses through the restrictions put in place by the governments in which the Company operates regarding travel, business operations and isolation/quarantine orders. At this time, the extent of the impact that the COVID19 outbreak may have on the Company is unknown as this will depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put in place. While the extent of the impact is unknown, the Company anticipates this outbreak may adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.

These financial statements have been prepared on a going concern basis, assuming that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. The Company has a deficit of $1,193,615 since inception. The continuing operations of the Company are dependent upon obtaining, in the short term, the necessary financing to meet the Company’s operating commitments as they come due and generating profitable operations in the future. These conditions indicate the existence of material uncertainty which casts significant doubt about the Company’s ability to continue as a going concern. Failure to continue as a going concern would require that assets and liabilities be recorded at their liquidation values, which might differ significantly from their carrying values.

2. BASIS OF PREPARATION

• a) Statement of compliance

These unaudited condensed interim financial statements are prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting under International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"). These unaudited condensed interim financial statements follow the same accounting policies and methods of application as the Company's most recent annual financial statements but do not contain all of the information required for full annual financial statements. Accordingly, these condensed interim financial statements should be read in conjunction with the

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HAPUNA VENTURES INC. NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2020

(Expressed in Canadian dollars)

Company's most recent annual financial statements, which were prepared in accordance with IFRS as issued by the IASB.

b) Basis of Measurement

These financial statements have been prepared on a historical cost basis, except for certain financial instruments, which are set out in annual audited financial statements of the Company as at September 30, 2019.

c) Presentation and Functional Currency

These financial statements are presented in Canadian dollars. The Canadian dollar is the functional currency of the Company.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

T he accounting policies of the Company are set out in Note 3 to the annual audited Financial Statements as of and for the year ended September 30, 2019, which are incorporated herein by reference. The reader is referred to those statements for a detailed discussion of the accounting policies. These condensed interim financial statements as at and for the six-month period ended March 31, 2020 have been prepared in accordance with the policies described in the annual audited Financial Statements, which have been applied consistently to these financial statements.

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

The estimates and assumptions of the Company are set out in Note 3 to the annual audited Financial Statements as of and for the year ended September 30, 2019, which are also incorporated herein by reference.

The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the year of the change, if the change affects that year only, or in the year of the change and future years, if the change affects both.

Recent Accounting Pronouncements

In January 2016, the IASB issued IFRS 16, Leases ("IFRS 16") which replaces IAS 17, Leases and its associated interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-term leases or leases of low-value assets. Lessor accounting remains similar to current accounting practice. The standard is effective for annual periods beginning on or after January 1, 2019. The Company went through the process and identified no contracts that might be relevant under the new standard. The Company has not early adopted the new standard.

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HAPUNA VENTURES INC. NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2020

(Expressed in Canadian dollars)

4. AMOUNTS RECEIVABLE

Amounts receivable consist of the following:

4. AMOUNTS RECEIVABLE Amounts receivable consist of the following:
Trade accounts receivable Recoverable goods and services / harmonized sales tax	March 31, 2019 September 30, 2019
	$ - $ - 4,493 9,144
	$ 4,493 $ 9,144

5. INTANGIBLE ASSETS

	Customer Relationships – Online Advertising Online Advertising Leads Database Total
Cost September 30, 2017 Transfer on closing of Arrangement September 30, 2018 Accumulated amortization and impairment September 30, 2017 Amortization expense Impairment provision September 30, 2018 Net book value September 30, 2019 March 31,2020	$ - $ - $ - 108,000 217,000 325,000
	108,000 217,000 325,000
	- - - - - - 108,000 216,999 324,999
	108,000 216,999 324,999
	$ - $ 1 $ 1
	$ - $ 1 $ 1

The Company acquired relationships with online advertising customers and an online advertising leads database from ACT360 upon closing of the Arrangement on December 13, 2017 for a $325,000 promissory note payable to ACT360 bearing interest at 6% per annum and due on the third anniversary of the promissory note.

Customer Relationships

Customer relationships consist of relationships with various post-secondary education institutions, with online advertising services provided by the Company to recruit students to these institutions.

Online Advertising Leads Database

The Company’s online advertising leads database consists of personal information collected from potential student leads during the online advertising process.

Revenue relating to these assets has decreased by approximately 89% over the last three years and the Company is economically dependent on three customers. Given that management is not in a position to be able to estimate the future cash flows attributable to the customer relationships and online advertising leads database with any degree of certainty, they were written down to a nominal amount of $1 at September 30, 2018. No changes during year ended September 30, 2019 and six-month period ended March 31, 2020. See Note 6.

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HAPUNA VENTURES INC. NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2020

(Expressed in Canadian dollars)

6. PROMISSORY NOTE PAYABLE

On closing of the Arrangement, the Company executed a promissory note in favour of ACT360 in the principal amount of $325,000 with a maturity date of December 13, 2020. Interest is calculating and accruing daily at 6% per annum from the date of issue, payable on a semi-annual basis commencing on June 13, 2018. The promissory note may be negotiated, assigned, discounted or pledged by ACT360. The amount payable consists of the following:

		March 31, 2020		September 30,
				2019
Principal	$	325,000	$	325,000
Accrued interest		44,824		35,048
Total	$	369,824	$	360,048

At September 30, 2019, the fair value of the promissory note payable was approximately $358,000 (2018 – $331,000). Fair value was determined using an income approach. An income approach is a present value technique that takes into account the future cash flows that would be expected to be received from holding the promissory note as an asset. Present value was calculated using the following attributes – semi-annual interest payments of $9,750, repayment of $325,000 principal at maturity, 27 months to maturity and a discount rate of 6% discounted annually.

7. SHARE CAPITAL

The Company has authorized share capital of an unlimited number of common shares and preferred shares without par value. Common and/or preferred shares are entitled to receive dividends if and when they are declared by the Board of Directors.

During the six-month period ended March 31, 2020, there were no changes to the Company’s share capital.

During the year period ended September 30, 2019, the Company completed on November 2, 2018 and August 7, 2019, the Company closed two private placements consisting of 813,330 and 100,000 units, respectively, for total gross proceeds of $91,333. Each unit consisted of one common share of the company and one common share purchase warrant entitling the holder to purchase one additional share at 10 cents per share for a period of one year from the date of the issue. Share offering costs of $837 were incurred in connection with this private placement. Subscriptions received of $60,000 was reclassified to share capital.

8. WARRANTS

Warrant transactions related to the private placement completed during the year are summarized as follows:

Outstanding, September 30, 2019 Expired on November 2, 2019 Outstanding, March 31, 2020	Number of Warrants Weighted Average Exercise Price
	1,913,330 $ 0.10 (813,330) $0.10
	1,100,000 $0.10

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HAPUNA VENTURES INC. NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2020

(Expressed in Canadian dollars)

The following table summarizes information about warrants outstanding at March 31, 2020:

Expiry Date Exercise Price Per Share	Outstanding
February 21, 2023 $0.10 August 7, 2020 $0.10	1,000,000 100,000
	1,100,000

9. RELATED PARTY TRANSACTIONS

The Company has identified its directors and certain senior officers as its key personnel and the compensation costs for key personnel and companies related to them were recorded at their exchange amounts as agreed upon by transacting parties.

The remuneration of the Company's directors and other key management was as follows during the periods ended March 31, 2020 and 2019:

Consulting fees (a) Management salary (b) Management fees (c) Accounting fees (d)	2020 2019 30,000 $ 30,000 $ 1,029 895 15,000 15,000 4,500 - 50,529 $ 45,895 $ Three-month period ended March 31	Six-month period ended 2020 2019 March 31
		60,000 $ 60,000 $ 1,953 1,303 30,000 30,000 9,000 2,500
		100,953 $ 93,803 $

(a) Consulting fees of $30,000 ($60,000) (2019 - $30,000 and $60,000) were paid or accrued to a director.

(b) Management salary of $1,029 ($1,953) (2019 - $895 and $2,198) was allocated by ACT360 with respect to the Company’s VP of Development.

(c) Management fees are paid pursuant to the Management Administrative Services Agreement. See below. (d) Accounting fees of $4,500 ($9,000) (2019 - $2,500) were allocated from Kona Bay with respect to fees paid or accrued to a company controlled by the Chief Financial Officer of the Company.

As at March 31, 2020 and September 30, 2019, $189,000 and $126,000 respectively were owing to key management personnel for fees and expenses and the amounts were included in accounts payable. As at March 31, 2020 the same key management personnel advanced $14,800 (September 30, 2019 - $Nil) to the Company as a shareholder loan.

The amounts payable are non-interest bearing, are unsecured, and have no specific terms of repayment.

On December 15, 2017, the Company entered into a Management Administrative Services Agreement (the “MASA”) with Kona Bay for the purpose of providing certain management and administrative services to the Company. Pursuant to the MASA, the Company will pay a monthly service fee that will be reviewed and mutually agreed upon prior to the start of each fiscal year on October 1[st.] . The MASA terminated on September 30, 2019 and is currently in effect on a month-to-month basis.

During the six-month period ended March 31, 2020, the Company paid or accrued $30,000 (March 31, 2019 - $30,000) to Kona Bay.

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HAPUNA VENTURES INC. NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2020

(Expressed in Canadian dollars)

The balance due from ACT360 at March 31, 2020 and September 30, 2019 consists of revenue collected by ACT360 from the Company’s clients on the Company’s behalf, net of expenses incurred by ACT360 on the Company’s behalf.

These balances are unsecured, non-interest bearing and have no specific terms of repayment.

10. COMMITMENT

On December 15, 2017, the Company entered into a Consulting Agreement (the “CA”) with a consultant for the purpose of serving as the Company’s special projects advisor to assist the CEO with corporate development, M&A and finance as the Company executes its growth by acquisition program. Pursuant to the CA:

• The Company will pay a monthly retainer to be mutually agreed upon; and

• Either party may terminate the CA with 30 days written notice.

During the period ended March 31, 2020, the Company incurred $60,000 (2019 - $60,000) in consulting fees.

11. CAPITAL MANAGEMENT

The Company's capital currently consists of common shares of $269,997. The Company's objective when managing capital is to safeguard the entity's ability to continue as a going concern, meet financial obligations, have sufficient capital to achieve and maintain profitable operations and to provide returns for shareholders and benefits for other stakeholders. As at March 31, 2020, the Company had a working capital deficiency of $553,795 (September 30, 2019 – deficiency of $382,063) and requires additional capital. Management expects to raise such additional capital during the current fiscal year.

12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The company is exposed through its operations to the following financial risks:

• Market Risk

• Credit Risk

• Liquidity Risk

In common with all other businesses, the company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies, and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

General Objectives, Policies, and Processes

The Board of Directors has overall responsibility for the determination of the Company’s risk management objectives and policies and, while retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company’s finance function.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility. Further details regarding these policies are set out below.

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HAPUNA VENTURES INC. NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2020

(Expressed in Canadian dollars)

Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices are comprised of four types of risk: foreign currency risk, interest rate risk, commodity price risk and equity price risk.

Foreign Currency Risk

Foreign currency risk is the risk that a variation in exchange rates between the Canadian dollar and United States dollar or other foreign currencies will affect the Company’s operations and financial results. The Company is exposed to currency risk to the extent that monetary assets and liabilities held by the Company are not denominated in Canadian dollars. The Company has not entered into any foreign currency contracts to mitigate this risk.

The Company occasionally holds balances in United States dollars which could give rise to exposure to foreign exchange risk. The Company did not have any United States dollars or United States dollar denominated balances as of March 31, 2020.

Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Financial instruments which are potentially subject to credit risk for the Company consist primarily of cash and cash equivalents and trade accounts receivable. Cash and cash equivalents are maintained with financial institutions of reputable credit and may be redeemed upon demand. The Company has no trade accounts receivable at March 31, 2020. The Company considers this risk to be minimal during period ended and as of March 31, 2020.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meets its financial obligations as they become due. The Company’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. They key to success in managing liquidity is the degree of certainty in the cash flow projections. If future cash flows are fairly uncertain, the liquidity risk increases.

The Company’s objective is to ensure that it has sufficient cash on demand to meet expected operational expenses. To achieve this objective, the Company will prepare annual capital expenditure budgets which will be regularly monitored and updated as necessary.

The Company monitors its risk of shortage of funds by monitoring the maturity dates of existing trade and other accounts payable. The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities:

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HAPUNA VENTURES INC.

NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 2020

(Expressed in Canadian dollars)

March 31, 2020 Accounts payable and accrued liabilities Shareholder loan Due to Kona Bay Promissory note payable September 30, 2019 Bank overdraft Accounts payable and accrued liabilities Due to Kona Bay Promissory note payable	Up to 3 months Between 3 & 12 months Between 1 & 3 years Total $407,602 $ - $ - $407,602 14,800 - - 14,800 184,434 - - 184,434 4,861 39,963 325,000 369,824
	$611,697 $ 39,963 $325,000 $976,660
	$ 471 $ - $ - $ 471 287,922 - - 287,922 143,484 - 143,484 30,133 4,915 325,000 360,048
	$462,010 $4,915 $325,000 $791,925

13. EVENTS AFTER THE REPORTING PERIOD

The Company has evaluated its activities subsequent to March 31, 2020 and has determined that there are no material events to be reported.

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