Ultra Lithium Inc. — Interim / Quarterly Report 2021

Jun 30, 2021

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ULTRA RESOURCES INC.

(the “Company”) (Formerly Ultra Lithium Inc.)

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2021

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

The management of Ultra Resources Inc. is responsible for the preparation of the accompanying unaudited condensed interim consolidated financial statements. The unaudited condensed interim consolidated financial statements have been prepared using accounting policies in compliance with International Financial Reporting Standards for the preparation of condensed interim consolidated financial statements and are in accordance with IAS 34 – Interim Financial Reporting.

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

Ultra Resources Inc.

(Formerly Ultra Lithium Inc.)

Condensed Interim Consolidated Statements of Financial Position (Expressed in Canadian Dollars)

Note	Unaudited April 30, 2021 Audited October 31, 2020
Assets Current assets: Cash and cash equivalents Amounts receivable Prepaid expenses and deposits Marketable securities 3	$ $ 838,087 88,169 6,028 1,666 21,446 31,072 - 41,887
Noncurrent assets: Exploration advance 5 Exploration and evaluation assets 5	865,561 162,794 4,269 2,104 2,472,079 2,214,590
	3,341,909 2,379,488
Liabilities and Shareholders’ Equity Current liabilities: Trade payables and accrued liabilities 8	222,013 98,143
Shareholders’ equity: Share capital 7 Reserves 7 Deficit	222,013 98,143 17,108,848 16,065,019 1,152,132 1,080,450 (15,141,084) (14,864,124)
	3,119,896 2,281,345
	3,341,909 2,379,488

Nature and continuance of operations (Note 1) Subsequent events (Note 12)

“Weiguo Lang” Director Weiguo Lang

“Andrew Lee Smith” Director

Andrew Lee Smith

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

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Ultra Resources Inc.

(Formerly Ultra Lithium Inc.)

Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited - Expressed in Canadian Dollars)

Note	Three months ended April 30, Six months ended April 30, 2021 2020 2021 2020
Expenses: Bank charges and interest Consulting fees Depreciation 4 General exploration 8 Management fees 8 Office, rent and administration Professional fees 8 Stock exchange and filing fees Transfer agent fees Travel and promotion	$ $ $ $ 1,342 1,517 2,527 3,048 22,500 22,500 45,000 45,000 - 1,500 - 3,249 4,936 13,650 13,650 21,623 30,000 30,000 60,000 60,000 23,506 22,086 43,767 43,605 23,308 24,813 49,872 49,375 20,257 7,330 27,834 13,905 2,180 1,352 4,702 3,881 - - 3,371 8,005
	(128,029) (124,748) (250,723) (251,691)
Other income (expenses): Interest income Gain (loss) on marketable securities 3 Foreign exchange gain (loss)	- 675 - 1,866 - (15,277) 5,832 6,546 (29,883) 22,968 (32,069) 26,239
	(29,883) 8,366 (26,237) 34,651
Loss for the period Other comprehensive income (loss): Foreign currency translation	(157,912) (116,382) (276,960) (217,040) 826 35 806 19
Comprehensive loss for theperiod	(157,086) (116,347) (276,154) (217,021)
Basic and diluted lossper share	(0.00) (0.00) (0.00) (0.00)
Weighted average number of common shares – basic and diluted	99,137,547 95,828,560 97,706,708 95,828,560

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

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Ultra Resources Inc.

(Formerly Ultra Lithium Inc.)

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Unaudited - Expressed in Canadian Dollars)

(Unaudited - Expressed in Canadian Dollars)
Share Capital		Reserves
Note Common shares Amount	Equity reserve	Foreign currency translation Total	Deficit Total shareholder’s equity
# $ $		$ $	$ $
Balance, October 31, 2019 95,828,560 16,027,519 969,601 Comprehensive loss for theperiod - - -		112,998 1,082,599 19 19	(14,395,092) 2,715,026 (217,040) (217,021)
Balance, April 30, 2020 95,828,560 16,027,519 969,601		113,017 1,082,618	(14,612,132) 2,498,005
Balance, October 31, 2020 96,322,528 16,065,019 969,601 Shares issued for cash 10,892,900 1,198,219 - Share issuance cost - (154,390) 70,876 Comprehensive loss for the period - - -		110,849 1,080,450 - - - 70,876 806 806	(14,864,124) 2,281,345 - 1,198,219 - (83,514) (276,960) (276,154)
Balance, April 30, 2021 107,215,428 17,108,848 1,040,477		111,655 1,152,132	(15,141,084) 3,119,896

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

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Ultra Resources Inc.

(Formerly Ultra Lithium Inc.)

Condenced Interim Consolidated Statements of Cash Flows (Unaudited - Expressed in Canadian Dollars) For the six months ended April 30,

Ultra Resources Inc. (Formerly Ultra Lithium Inc.) Condenced Interim Consolidated Statements of Cash Flows (Unaudited - Expressed in Canadian Dollars) For the six months ended April 30,
2021	2020
$ Operations: Loss for the period (276,960) Items not involving cash: Depreciation - Finance cost - Remeasurement loss (gain) on marketable securities 21,887 Gain on sale of marketable securities (27,719) Changes in non-cash working capital items: Amounts receivable (4,362) Prepaid expenses and deposits 9,626 Trade payables and accrued liabilities 124,001	$ (217,040) 3,249 610 (6,546) - 7,405 (11,006) (10,257)
(153,527)	(233,585)
Financing: Shares issued for cash 1,198,219 Share issuance cost (83,514) Leasepayments 47,719	- - (3,859)
1,162,424	(3,859)
Investing: Exploration and evaluation assets (259,880)	(251,990)
(259,880)	(251,990)
Change in cash and cash equivalents 749,017 Effects of foreign exchange translation on cash 901 Cash and cash equivalents, beginning of period 88,169	(489,434) 19 927,528
Cash and cash equivalents, end ofperiod 838,087	438,113
Supplementary information: Exploration advance allocated to expenditure of exploration assets 2,165 Right-to-use asset recognized - Modification to right-to-use asset and lease liability - Finders’ fee warrants 70,876 Cash and cash equivalents consist of: Cash 828,087 Guaranteed investment certificates 10,000	14,814 12,252 (9,003) - 149,913 288,200
838,087	438,113

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

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.) Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 1 – NATURE AND CONTINANCE OF OPERATIONS

Ultra Resources Inc. (the “Company"; formerly Ultra Lithium Inc.) was incorporated on November 27, 2004 under the Business Corporations Act of British Columbia and is engaged in the acquisition, exploration and evaluation of exploration and evaluation assets. On December 2, 2019, the Company changes its name to Ultra Resources Inc. The Company’s common shares are listed for trading on Tier 2 of the TSX Venture Exchange (the “Exchange”) under the symbol “ULT”.

The head office and principal address of the Company are located at 2735 Carolina Street, Vancouver, BC, Canada, V5T 3T3. The Company’s records office and registered office address is located at Suite 3500 - 1055 Dunsmuir Street, PO Box 49114, Vancouver, British Columbia, Canada, V7X 1H7.

The Company is in the process of exploring its exploration and evaluation assets and has not yet determined whether these properties contain mineral reserves that are economically recoverable. The Company’s ability to continue as a going concern and the recoverability of the amounts shown for exploration and evaluation assets are dependent upon the ability of the Company to raise additional financing in order to complete the exploration and development of its resource properties, the discovery of economically recoverable reserves and upon future profitable production or proceeds from disposition of the Company’s exploration and evaluation assets. As a resource company in the exploration stage, the ability of the Company to complete its acquisition, exploration and development will be affected principally by its ability to raise adequate amounts of capital through equity financings, debt financings, joint venturing of projects and other means.

These condensed interim consolidated financial statements have been prepared on a basis of accounting principles applicable to a going concern which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has a history of losses with no operating revenue other than interest income and had a working capital of $643,548 as at April 30, 2021 (October 31, 2020 - $64,651) and accumulated deficit of $15,141,084 (October 31, 2020 - $14,864,124) and expects to incur further losses in the development of its business. The Company requires additional financing in order to fund working capital requirements and operations for the upcoming fiscal year. While the Company has been successful in securing financings in the past, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be available on acceptable terms. These material uncertainties may cast significant doubt on the entity’s ability to continue as a going concern.

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. The future impact on the Company’s ability to carry out its business operations is not currently determinable but management continues to monitor the situation.

These condensed interim consolidated financial statements do not reflect any adjustments, which could be material, to the carrying values of assets and liabilities, which may be required should the Company be unable to continue as a going concern.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The condensed interim consolidated financial statements were authorized for issue on June 29, 2021 by the Directors of the Company. The accounting policies have been applied consistently to all years presented in these consolidated financial statements.

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.) Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Basis of presentation and consolidation

These condensed interim consolidated financial statements are unaudited and have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ (“IAS 34”) using accounting policies consistent with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). These interim financial statements should be read in conjunction with the audited financial statements for the year ended October 31, 2020, which have been prepared in accordance with IFRS.

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Ultra Lithium (USA) Inc. (“ULI USA”), Ultra Balkans D.O.O. Beograd (“ULI Balkans”) and Ultra Dragon Holdings Inc. (“Ultra Dragon”). All intercompany balances and transactions are eliminated on consolidation.

NOTE 3 – MARKETABLE SECURITIES

Marketable securities are comprised of common shares in public companies received pursuant to option agreements.

	April 30, 2021	October 31, 2020
	$	$
Opening fair value	41,887	11,000
Unrealized gain (loss)	(21,887)	30,887
Sale of marketable securities	(47,719)	-
Realized gain	27,719	-
Ending fair value	-	41,887

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.) Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 4 – RIGHT-TO-USE ASSET

The Company recognizes right-of-use assets and corresponding lease liabilities related to certain office facilities. See Note 6 – "Lease Liabilities" for additional information regarding the Company's leases.

	Offices	Total
	$	$
Cost
Balance October 31, 2019	-	-
Recognized on addoption of IFRS 16	12,252	12,252
Modification	(9,003)	(9,003)
Balance, October 31, 2020 and April 30, 2021	3,249	3,249
Accumulated Depreciation
Balance October 31, 2019	-	-
Additions	3,249	3,249
Balance, October 31, 2020 and April 30, 2021	3,249	3,249
Carrying Value
October 31, 2020	-	-
April 30,2021	-	-

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.)

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 5 – EXPLORATION AND EVALUATION ASSETS

Exploration and evaluation assets are comprised of:

	Georgia Lake Ontario Forgan Lake, Ontario Antofagasta, Argentina La Rioja, Argentina Archivarca, Argentina Big Smoky Valley, Nevada Total (a) (b) (c) (d) (e) (f)
Balance, October 31, 2019	$ $ $ $ $ $ $ 208,182 217,180 1,202,359 182,770 4,304 - 1,814,795
Acquisition costs Exploration and evaluation expenditures Subtotal	- 75,000 132,330 - - - 207,330 3,535 17,735 79,586 91,609 - - 192,465
	3,535 92,735 211,916 91,609 - - 399,795
Balance, October 31, 2020 Acquisition costs Exploration and evaluation expenditures Subtotal	211,717 309,915 1,414,275 274,379 4,304 - 2,214,590 - - 125,710 - - 9,487 135,197 1,625 13,975 43,675 63,017 - - 122,292
	1,625 13,975 169,385 63,017 - 9,487 257,489
Balance, April 30, 2021	213,342 323,890 1,583,660 337,396 4,304 9,487 2,472,079

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.)

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 5 – EXPLORATION AND EVALUATION ASSETS (Continued)

Exploration and evaluation costs were as follows:

Georgia Lake Ontario (a)	Forgan Lake, Ontario Antofagasta, Argentina La Rioja, Argentina Total (b) (c) (d)
$ For the year ended October 31, 2020 Assays - Drilling - Exploration expense - Geology and geophysics - Licenses, permits, claim fees and taxes 750 Local office and administration 2,785 Travel -	$ $ $ $ - - 20,258 20,258 - - - - - 9,661 3,613 13,274 14,950 26,432 27,782 69,164 - 465 276 1,491 2,785 28,929 25,635 60,134 - 14,099 14,045 28,144
Total 3,535	17,735 79,586 91,609 192,465
For the period ended April 30, 2021 Assays - Drilling - Exploration expense - Geology and geophysics - Licenses, permits, claim fees and taxes - Local office and administration 1,625 Travel -	- - 200 200 - - - - - 9,122 15,131 24,253 12,350 16,270 12,761 41,381 - 7,758 1,696 9,454 1,625 6,539 21,182 30,971 - 3,986 12,047 16,033
Total 1,625	13,975 43,675 63,017 122,292

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.) Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 5 – EXPLORATION AND EVALUATION ASSETS (Continued)

• (a) Georgia Lake Property, Ontario

The Company holds certain claims staked in Ontario.

• (b) Forgan Lake, Ontario

On September 4, 2018, the Company entered into an purchase agreement with International Lithium Corp. (“ILC”) to acquire 100% interest in the Forgan Lake Lithium property for a consideration of $200,000 ($191,000 as per the amendment agreement dated October 17, 2019) in cash and shares over the period of two years: $25,000 in cash (paid) and $25,000 in shares on signing (issued), $37,500 in cash and $37,500 in shares on the first anniversary ($66,000 in cash paid on the first anniversary as per the amendment agreement dated October 17, 2019), and $37,500 in cash and $37,500 in shares on the second anniversary of the agreement date (paid and issued). The property is located in the Thunder Bay Mining District in Northwestern Ontario, Canada, and is subject to 1.5% NSR with an option for the Company to purchase 1% NSR for $1,000,000. As of April 30, 2021, the Company has paid $191,000 ($128,500 cash and issued 634,700 shares with value of $62,500) as the purchase consideration. (Note 7)

(c) Antofagasta, Argentina

On August 4, 2017, the Company entered into an option agreement to acquire 100% interest in three lithium brine properties located in the Antofagasta region, Province of Catamarca in Argentina. Under the terms of agreement, the Company will pay $2,486,040 Argentinian Pesos (approximately $155,378 USD) to the Mining Secretariat of Catamarca for outstanding canon fees. Thirty days after completion of verification sampling and due diligence the Company will pay $30,000 USD. Commencing 270 days thereafter, the Company will pay $1,960,000 USD in eight equal quarterly payments to acquire 100% rights to the property. The property is subject to 2.5 % royalty. During November 2017, the Company settled $1,611,520 Argentinian Pesos canon fees for certain concessions. In December 2017, the Company paid $30,000 USD as per the terms of option agreement.

On June 28, 2019, the Company entered into an option agreement to acquire 100% interest in one lithium brine property located in the Antofagasta region, Province of Catamarca in Argentina. Under the terms of agreement, the Company will pay $500,000 USD in five equal bi-annual payments to acquire 100% rights to the property. The property is subject to 2.5 % royalty. As of April 30, 2021, the Company has paid $300,000 USD in instalments as per the terms of option agreement.

• (d) La Rioja, Argentina

The Company holds certain claims (the “ULTRA” claims) staked in La Rioja, Argentina.

On June 24, 2019, the Company acquired thirteen gold mining licenses in Chepes Area, La Rioja Province, Argentina (the “Chepes licences”). The Company will pay the vendor 10% of the profit from any future production from the Chepes licences. The Company also agreed to pay the vendor 5% of the profit from any future production from its ULTRA claims which are in the vicinity of the newly acquired Chepes licences

• (e) Archivarca, Argentina

The Company holds certain claims staked in Archivarca, Argentina.

• (f) Big Smoky Valley, Nevada

The Company holds certain claims staked in Big Smoky Valley, Nevada.

As at April 30, 2021, the Company had made advance payments towards future exploration work of $4,269 (October 31, 2020 - $2,104).

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.) Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 6 – LEASE LIABILITIES

	Total
	$
Balance, October31,2019	-
Recognition upon adoption of IFRS 16	12,252
Interest expense	610
Payments	(3,859)
Modification	(9,003)
Balance,October 31,2020 and April 30,2021	-

NOTE 7 – SHARE CAPITAL AND RESERVES

• (a) Authorized

Unlimited number of voting common shares without par value.

• (b) Issued Share Capital

At April 30, 2021, there were 107,215,428 issued and fully paid common shares (October 31, 2020 – 96,322,528).

• (c) Share Issuances

On April 7, 2021, the Company completed a private placement of 10,892,900 units for gross proceeds of $1,198,219. Each unit is comprised of one common share and one half common share purchase warrant exercisable at $0.20 for a period of one year from the date of issuance. The Company’s directors and officers participated in the private placement. The Company paid finders fees of $77,523 cash and 704,753 warrants for this placement. The finders fee warrants have a value of $70,876 calculated using the Black-Scholes option pricing model with an expected volatility of 154.53%, expected dividend yield of 0%, expected term of 1 year, and a riskfree interest rate of 0.26%.

On September 29, 2020, the Company issued 493,968 common shares with a value of $37,500 for Forgan Lake Property acquisiton. (Note 5c)

(d) Warrants

Each whole warrant entitles the holder to purchase one common share of the Company. A summary of the status of the warrants outstanding follows:

		Weighted Average
	Warrants	Exercise Price
	#	$
Balance, October 31, 2019 and 2020	12,544,623	0.12
Issued	6,151,203	0.20
Exercised	-	-
Expired	-	-
Balance, April 30, 2021	18,695,826	0.15

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.) Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 7 – SHARE CAPITAL AND RESERVES (Continued)

• (d) Warrants (continued)

The following table summarizes the warrants outstanding as at April 30, 2021:

Warrants	Exercise Price	Expiry Date
#	$
12,544,623	0.12	May 15, 2021
6,151,203	0.18	April 7,2022
18,695,826

(e) Stock Options

The Company adopted a stock option plan whereby the Company may from time to time in accordance with the Exchange requirements grant to directors, officers, employees and consultants options to purchase common shares of the Company provided that the number of options granted, including all options granted by the Company to date, does not exceed 10% of the Company’s common shares issued and outstanding at the time of granting stock options.

A summary of the status of the options outstanding follows:

		Weighted Average
	Options	Exercise Price
	#	$
Balance, October 31, 2019 & 2020	5,735,000	0.16
Granted	-	-
Exercised	-	-
Expired	(10,000)	0.10
Balance,April 30,2021	5,725,000	0.16

The following table summarizes the options outstanding and exercisable as at April 30, 2021:

	Exercise Price
Shares	Per Share	Expiry Date	Exercisable
#	$		#
130,000	0.10	April 19, 2023	130,000
2,440,000	0.13	March 8, 2026	2,440,000
2,150,000	0.19	September 08, 2022	2,150,000
1,005,000	0.205	April 4,2023	1,005,000
5,725,000			5,725,000

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.) Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 8 – RELATED PARTY TRANSACTIONS

• (a) Related party transactions

During the three and six months ended April 30, 2021, the Company incurred the following transactions with (i) a company that is controlled by a former officer of the Company and (ii) with a company controlled by the VP exploration:

Three months ended April 30,	Three months ended April 30,	Six months ended April 30,
2021	2020	2021 2020
$ Legal fees_(i)_ 811	$ 538	$ $ 4,463 1,433
Geological fees(ii) 19,500 19,500		39,000 39,000
20,311 20,038		43,463 40,433

• (b) Compensation of key management personnel

The remuneration of directors and other members of key management personnel were as follows:

		Three months ended April 30,	Three months ended April 30,	Six months ended April 30,	Six months ended April 30,
		2021	2020	2021	2020
		$	$	$	$
Short-term benefits	(1)	52,500	52,500	105,000	105,000
		52,500	52,500	105,000	105,000

(1) Short-term benefits include management fees paid directly to key management and and accounting fee paid to a company controlled by the CFO.

• (c) Related party balances

Included in accounts payable are $15,724 owed to the CEO (October 31, 2020 - $785), $14,400 owed to the VP Exploration (October 31, 2020 - $750), $2,625 owed to a director (October 31, 2020 - $nil) and $15,750 to the CFO (October 31, 2020 - $nil) for fees and expenses.

Included in prepaid expenses is $382 (October 31, 2020 - $414) advanced to the VP Exploration for expenses and $365 (October 31, 2020 - $500) advanced to the CFO for expenses.

NOTE 9 – SEGMENTED INFORMATION

The Company operated in the following geographic segments as at:

Canada $ Exploration and evaluation assets April 30, 2021 537,232 October 31, 2020 521,632	Argentina United States	Total
	$ $	$
	1,925,360 9,487 1,692,958 -	2,472,079 2,214,590

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.) Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 10 - FINANCIAL RISK EXPOSURE AND RISK MANAGEMENT

• (a) Fair Value of Financial Instruments

The carrying values of amounts receivable and trade payables approximate their fair values because of their shortterm nature.

IFRS requires disclosures about the inputs to fair value measurements for financial assets and liabilities recorded at fair value, including their classification within a hierarchy that prioritizes the inputs to fair value measurement.

The three levels of hierarchy are:

Level	1	-	Unadjusted quoted prices in active markets for identical assets or liabilities;
Level	2	-	Inputs other than quoted prices that are observable for the asset or liability, either directly
			or indirectly; and
Level	3	-	Inputs for the asset or liability that are not based on observable market data.

The fair value of the cash and cash equivalents and marketable securities is Level 1 inputs.

• (b) Financial Instruments Risk

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board approves and monitors the risk management processes:

(i) Credit Risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company is subject to credit risk on the cash balances and shortterm bank guaranteed investment certificates (“GIC”) at the bank and amounts receivable. The risk to the Company managed as its investments are with Schedule 1 banks or equivalent, with the majority of its cash held in Canadian based banking institutions, authorized under the Bank Act to accept deposits, which may be eligible for deposit insurance provided by the Canadian Deposit Insurance Corporation. The credit risk from amounts receivable is also minimal as at April 30, 2021, the amounts receivable consists primarily of GST.

(ii) 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’s approach to managing liquidity is to ensure that it will have sufficient liquidity to settle obligations and liabilities when due. As at April 30, 2021, the Company had a cash and cash equivalents balance of $838,087 to settle current liabilities of $222,013 that are considered short term. Management believes that the Company will be able to obtain financing as required to meet its obligations and commitments for fiscal 2021.

(iii) Market Risk

a) Currency Risk

Currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company has subsidiaries in the United States and the Republic of Serbia and holds cash in Canadian dollars, United States dollars, Euros and Serbian Dinar currencies in line with forecasted expenditures. The Company’s main risk is associated with fluctuations in the US dollar, Euros and Serbian Dinar and assets and liabilities are translated based on the foreign currency translation policy described in Note 2.

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.) Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 10 - FINANCIAL RISK EXPOSURE AND RISK MANAGEMENT (continued)

(iii) Market Risk (continued)

The Canadian dollar equivalent of the Company’s net exposure to the US dollar, Euros and Serbian Dinar on financial instruments is as follows:

	April 30,	October 31,
	2021	2020
	$	$
US dollar:
Cash	697,094	56,652
Trade payable and accrued liabilities	(3,052)	(1,125)
Net US dollar	(694,042)	55,527
Serbian Dinar:
Amounts receivable	638	667
Trade payable and accrued liabilities	(44,379)	(46,438)
Net Serbian Dinar	(43,741)	(45,771)

The Company has determined that an effect of a 10% increase or decrease in the US dollar and Serbian Dinar against the Canadian dollar on financial assets and liabilities, as at April 30, 2021, denominated in US dollars and Serbian Dinar, would result in an increase or decrease of approximately $65,030 to the net loss for the period ended April 30, 2021. At April 30, 2021, the Company had no hedging agreements in place with respect to foreign exchange rates. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.

b) Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The interest on cash and cash equivalents is typical of Canadian banking rates, which are at present low, however, the conservative investment strategy mitigates the risk of deterioration to the investment. A change of 100 basis points in the interest rates would not be material to the Company’s consolidated financial statements.

c) Commodity Price Risk

Commodity price risk is the risk of financial loss resulting from movements in the price of the Company’s commodity inputs and outputs. The Company’s risk relates primarily to the expected output to be produced at its exploration and evaluation assets described in Note 5 of which production is not expected in the near future.

During the period ended April 30, 2021, there were no changes to the Company’s risk exposure or to the Company’s policies for risk management.

NOTE 11 - CAPITAL MANAGEMENT

The Company’s objectives when managing capital are to ensure that there are adequate capital resources to safeguard the Company’s ability to continue as a going concern and maintain adequate levels of funds to support the acquisition, exploration and development of exploration and evaluation assets such that it can continue to provide returns to shareholders and benefits for other stakeholders..

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Ultra Resources Inc. (Formerly Ultra Lithium Inc.) Notes to the Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian Dollars) For the three and six months ended April 30, 2021

NOTE 11 - CAPITAL MANAGEMENT (continued)

The Company considers the items included in shareholders’ equity as capital. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the Company’s underlying assets. In order to maintain or adjust its capital structure, the Company may issue new shares or sell assets to settle liabilities. The Company has no long-term debt and is not subject to externally imposed capital requirements.

The properties in which the Company currently has an interest in are in the exploration stage, as such, the Company does not recognize revenue from its exploration properties. The Company’s historical sources of capital have consisted of the sale of equity securities, loans, and advances from related parties. In order for the Company to carry out planned exploration and development and pay for administrative costs, the Company will spend its working capital and expects to raise additional amounts externally as needed.

The Company is not subject to any externally imposed capital requirements.

There were no changes in the Company’s management of capital during the period ended April 30, 2021.

NOTE 12 – SUBSEQUENT EVENT

Subsequent to the period ended April 30, 2021,

• (a) the Company issued 147,500 common shares upon exercise of warrants for gross proceeds of $17,700.

• (b) the Company issued 100,000 common shares upon exercise of share options for gross proceeds of $13,000.

• (b) 12,397,123 warrants exercisable at $0.12 each expired unexercised.

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