UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended: April 30,July 31, 2021

For the transition period from_______to_______

Commission file number 000-52055

RED METAL RESOURCES, LTD.

(Exact name of small business issuer as specified in its charter)

278 Bay1130 Pender Street West, Suite 102820,Vancouver, BC Thunder Bay,ONP7B 1R8V6E 4A4

(Address of principal executive offices) (Zip Code)

(866807-)345-7384907-5403

(Issuer’s telephone number)

278 Bay Street, Suite 102, Thunder Bay, ON P7B 1R8

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ Yes  ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ☒ Yes  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of JuneSeptember 14, 2021, the number of shares of the registrant’s common stock outstanding was 45,097,087.

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Table of Contents

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

RED METAL RESOURCES LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(EXPRESSED IN US DOLLARS)

(UNAUDITED)

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

RED METAL RESOURCES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(EXPRESSED IN US DOLLARS)

(UNAUDITED)

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

RED METAL RESOURCES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(EXPRESSED IN US DOLLARS)

(UNAUDITED)

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

RED METAL RESOURCES LTD.

NOTES TO THE CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

APRIL 30,JULY 31, 2021

(UNAUDITED)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Nature of Operations

Red Metal Resources Ltd. (the “Company”) is involved in acquiring and exploring mineral properties in Chile through its wholly-owned subsidiary, Minera Polymet SpA (“Polymet”) organized under the laws of the Republic of Chile. The Company has not determined whether its properties contain mineral reserves that are economically recoverable.

Unaudited Condensed Consolidated Financial Statements

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). They do not include all information and footnotes required by GAAP for complete financial statements. Except as disclosed herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statements for the year ended January 31, 2021, included in the Company’s Annual Report on Form 10-K, filed with the SEC. The unaudited condensed consolidated financial statements should be read in conjunction with those financial statements included in Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three and six months ended April 30,July 31, 2021, are not necessarily indicative of the results that may be expected for the year ending January 31, 2022.

Going Concern

These unaudited condensed consolidated financial statements have been prepared on a going-concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated any significant revenues from mineral sales since inception, has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support of its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. The Company’s ability to achieve and maintain profitability and positive cash flows is dependent upon its ability to locate profitable mineral properties, generate revenues from mineral production and control production costs. Based upon its current plans, the Company expects to incur operating losses in future periods. The Company plans to mitigate these operating losses through controlling its operating costs. The Company plans to obtain sufficient working capital through additional debt or equity financing and private loans. At April 30,July 31, 2021, the Company had a working capital deficit of $143,010$53,954 and accumulated losses of $9,877,350$10,189,694 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. There is no assurance that the Company will be able to generate significant revenues in the future. These unaudited condensed consolidated financial statements do not give any effect to any adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in these unaudited condensed consolidated financial statements.

Uncertainty due to Global Outbreak of COVID-19

In March of 2020, the World Health Organization declared an outbreak of COVID-19 Global pandemic. The COVID-19 has impacted vast array of businesses through the restrictions put in place by most governments internationally, including the USA, Canadian and Chilean governments, as well as provincial and municipal governments, regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown to what extent the COVID-19 outbreak may impact the Company and its operations 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 world-wide to fight the virus. While the extent of the impact is unknown, the COVID-19 outbreak may hinder the Company’s ability to raise financing for exploration or operating costs due to uncertain capital markets, supply chain disruptions, increased government regulations and other unanticipated factors, all of which may also negatively impact the Company’s business and financial condition.

NOTE 2 - RELATED-PARTY TRANSACTIONS

The following amounts were due to related parties as at:

(a)Amounts are unsecured, due on demand and bear no interest. 

(b)On July 29, 2020, Polymet entered into mining royalty agreements (the “NSR Agreements”) with the Company’s CEO, CFO, and the major shareholder to sell net smelter returns (the “NSR”) on its mineral concessions. NSR range from 0.3% to 1.25% depending on particular concession and the purchaser. The Company’s CEO agreed to acquire the NSR for $1,500, CFO agreed to acquire the NSR for $1,000, and the major shareholder agreed to acquire his NSR for $2,500. 

The NSR will be paid quarterly once commercial exploitation begins and will be paid on gold, silver, copper and cobalt sales. If, within two years, the Company does not commence commercial exploitation of the mineral properties, an annual payment of $10,000 per purchaser will be paid.

Pursuant to Chilean law, the NSR agreements will come in force only when registered against the land title in Chile. Due to temporary safety restrictions associated with COVID-19 pandemic, the registration of the NSR Agreements has been deferred, therefore the payments made by the CEO, CFO, and the major shareholder have been recorded as advances on the books of the Company and will be applied towards the NSR Agreements, once they are fully legalized.

The following amounts were due under the notes payable the Company issued to related parties:

(c)The notes payable to related parties are based on Level 2 inputs in the ASC 820 fair value hierarchy. The notes payable to related parties accumulate interest at a rate of 8% per annum, are unsecured, and are  payable on or after August 31, 2022. 

During the three-month period ended April 30,July 31, 2021, the Company accrued $21,827 (April 30,$24,076 (July 31, 2020 - $17,182)$18,707) in interest expense on the notes payable to related parties.

During the six-month period ended July 31, 2021, the Company accrued $45,903 (July 31, 2020 - $35,889) in interest expense on the notes payable to related parties.

Transactions with Related Parties

During the three and six months ended April 30,July 31, 2021 and 2020, the Company incurred the following expenses with related parties:

NOTE 3 - UNPROVED MINERAL PROPERTIES

Following is the schedule of the Company’s unproved mineral properties as at April 30,July 31, 2021 and January 31, 2021:

Mineral Claims at April 30,July 31, 2021

Mineral Claims at January 31, 2021

NOTE 4- COMMON STOCK

On February 10, 2021, the Company changed its corporate jurisdiction from the State of Nevada to the Province of British Columbia. The Articles of Incorporation and Bylaws of the Company, under the Nevada Revised Statutes, were replaced with the Articles of the Company, under the Business Corporations Act (British Columbia). The authorized capital of the Company was amended to an unlimited number of common shares without par value (the “Shares”). The Company retroactively reclassified $6,240,304 associated with the historical share issuances from additional paid-in capital to common stock.

On FebruaryMay 17, 2021, the Company announcedclosed a non-brokered private placement of up to 6,666,666by issuing 3,849,668 units at a price of CAD$0.15 per unit (each a "Unit"“Unit”) for gross proceeds of up to CAD$1,000,000$477,982 (CAD$577,450) (the "Unit Offering"“Unit Offering”), which was closed subsequent to April 30, 2021 (Note 6). Each Unit consisted of one common share and one common share purchase warrant (the “Warrant”). Each Warrant entitles the holder thereof to purchase one additional common share of the Company at an exercise price of CAD$0.20 per common share for a period of 24 months from the date of issue. The Warrants are subject to an acceleration clause in the event that the common shares are listed on a recognized stock exchange and trade at a price of CAD$0.30 or greater for 10 consecutive trading days, in which event the Company may notify warrant holders that the Warrants must be exercised within a period of 30 days. In case the Warrant holders do not exercise them within the accelerated 30-day period, the warrants will expire automatically.

AsIn connection with the Unit Offering, the Company paid cash commissions aggregating $18,367 (CAD$22,397) and issued 149,310 Warrants to registered broker-dealers valued at April 30,$48,277. The Warrants are subject to the same terms and conditions as the Warrants purchased by other subscribers in the Unit Offering. The Company used Black-Scholes option pricing model to determine the value of the broker warrants. The following assumptions were used:

On May 14, 2021, the Company hadissued 29,411 shares of its common stock to a consultant for investor relations services. The Shares were issued pursuant to an independent contractors services agreement whereby the Company agreed to a $5,000 monthly fee payable to a consultant during a three-month period commencing on April 14, 2021. At the discretion of the Company, the cash fee can be paid in common shares of the Company at a deemed price of $0.17 per share for a total of 29,411 shares per month. At the time of the share issuance, the fair market value of the shares was $0.34, therefore the Company recognized $10,000 as part of its investor relation fees.

Warrants

The changes in the number of warrants outstanding during the six months period ended July 31, 2021, and for the year ended January 31, 2021, are as follows:

Details of warrants outstanding as at July 31, 2021, are as follows:

(1)Broker warrants issued on closing of the Unit Offering. 

At July 31, 2021, the weighted average life and exercise price of the warrants was 1.79 years and $0.20, respectively.

Recovery of Short-Swing Profits

During the six months ended July 31, 2021, the Company received $87,721 (CAD$110,000) in subscriptions$5,798 related to the Unit Offering.recovery of short-swing profits under Section 16(b) of the Securities Exchange Act of 1934, as amended. The Company did not have similar transactions during the six months ended July 31, 2020.

NOTE 5- SUBSCRIPTION RECEIPTS PAYABLE

On February 17,June 15, 2021, concurrent with the Unit Offering (Note 4), the Company announcedclosed a non-brokered private placement ofby issuing 6,460,872 subscription receipts (each a “Subscription Receipt”) for aggregate gross proceeds of up to CAD$1,000,000 at a price of CAD$0.15 per Subscription Receipt for aggregate gross proceeds of $777,669 (CAD$969,131) (the “SR Offering”).

Each Subscription Receipt will automatically entitleentitles the holder thereof, without payment of any additional consideration and without further action on the part of the holder, to acquire one Subscription Receipt Unit (an “SR Unit”). Until the escrow release conditions (including the listing of the Company’s common shares on a recognized stock exchange in Canada) are met in full, the indentures, representing Subscription Receipts, will be held in trust by an escrow agent appointed by the Company. No Subscription Receipts may be exercised by the holders thereof until all escrow release conditions are met in full.

Each SR Unit will consist of one Share and one Share purchase warrant (each, an “SR Warrant”). Each SR Warrant will entitle the holder to purchase an additional Share of the Company at a price of CAD$0.30 per Share, if exercised during the first year following the closing date of the SR Offering, and at a price of CAD$0.60, if exercised during the second year following closing date of the SR Offering. Pursuant to the terms of the SR Offering, in the event that the Company does not meet the escrow release conditions by September 30, 2021 (or such later date as may be agreed to by the Company), the escrow agent shall return to the holders of the Subscription Receipts an amount equal to the aggregate purchase price paid for the Subscription Receipts held by each holder, and each Subscription Receipt shall be cancelled and be of no further force or effect.

As at April 30, 2021, the Company had recorded $12,210 (CAD$15,000) as a liability underIn connection with the SR Offering.

NOTE 6 - SUBSEQUENT EVENTS

On May 14, 2021, the Company issued 29,411 Shares of its common stock to a consultant for IR services. The Shares were issued pursuant to an independent contractors services agreement wherebyOffering, the Company agreed to pay finders fees to certain registered broker dealers payable on the Escrow Release Date consisting of: (1) a $5,000 monthly fee payablecash commission in an amount equal to a consultant during a three-month period commencing on April 14, 2021. At the discretion7% of the Company,gross proceeds raised from subscribers to the cash fee can be paidSR Offering who were introduced by such finders, and (2) finders warrants in common sharesan amount equal to 7% of the Company at a deemed pricenumber of $0.17 per share for a total of 29,411 shares per month.

On May 17, 2021,Subscription Receipts purchased by subscribers introduced by such finders to the Company closed the Unit Offering (Note 4) by issuing 3,849,668 units at $0.12 (CAD$0.15) per Unit for gross proceeds of $477,956 (CAD$577,450)(the "Finder's Warrants"). In connection with the Unit Offering, the Company paid cash commissions aggregating $18,538 (CAD$22,397) and issued 149,310The Finder's Warrants to registered broker-dealers. The Warrants are subject towill be on the same terms and conditions as the SR Warrants purchased by other subscribers in the Unit Offering.

Subsequent to April 30, 2021, the Company received a total of CAD$969,130 in subscriptions to SR Offering (Note 5).as defined below.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q filed by Red Metal Resources Ltd. contains forward-looking statements. These are statements regarding financial and operating performance and results and other statements that are not historical facts. The words “expect,” “project,” “estimate,” “believe,” “anticipate,” “intend,” “plan,” “forecast,” and similar expressions are intended to identify forward-looking statements. Certain important risks could cause results to differ materially from those anticipated by some of the forward-looking statements. Some, but not all, of these risks include, among other things:

·general economic conditions, because they may affect our ability to raise money; 

·our ability to raise enough money to continue our operations; 

·changes in regulatory requirements that adversely affect our business; 

·changes in the prices for minerals that adversely affect our business; 

·political changes in Chile, which could affect our interests there; and/or 

·other uncertainties, all of which are difficult to predict and many of which are beyond our control. 

We caution you not to place undue reliance on these forward-looking statements, which reflect our management’s view only as of the date of this report. We are not obligated to update these statements or publicly release the results of any revisions to them to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events. You should refer to, and carefully review, the information in future documents we file with the Securities and Exchange Commission.

General

You should read this discussion and analysis in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Form 10-Q and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021. The inclusion of supplementary analytical and related information may require us to make estimates and assumptions to enable us to fairly present, in all material respects, our analysis of trends and expectations with respect to our results of operations and financial position taken as a whole. Actual results may vary from the estimates and assumptions we make.

Uncertainty due to Global Outbreak of COVID-19

In March of 2020, the World Health Organization declared an outbreak of COVID-19 Global pandemic. The COVID-19 has impacted vast array of businesses through the restrictions put in place by most governments internationally, including the USA, Canadian and Chilean governments, as well as provincial and municipal governments, regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown to what extent the impact of the COVID-19 outbreak may have on the Company 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 world-wide to fight the virus. While the extent of the impact is unknown, the COVID-19 outbreak may hinder the Company’s ability to raise financing for exploration or operating costs due to uncertain capital markets, supply chain disruptions, increased government regulations and other unanticipated factors, all of which may also negatively impact the Company’s business and financial condition.

Overview

Red Metal Resources Ltd. was incorporated under the Nevada Business Corporations Act on January 10, 2005, as Red Lake Exploration, Inc. On August 27, 2008, the name of the Company was changed to Red Metal Resources Ltd. On February 10, 2021, the Company changed its corporate jurisdiction from the State of Nevada to the Province of British Columbia by means of a process called a “conversion” under the Nevada Revised Statutes and a “continuation” under the Business Corporations Act (British Columbia). Upon the Company’s continuation to British Columbia, the Articles of Incorporation and Bylaws of the Company, under the Nevada Revised Statutes, were replaced with the Articles of the Company, under the Business Corporations Act (British Columbia). The authorized capital of the Company was amended to an unlimited number of common shares without par value.

The Company’s head office is located at 278 Bay1130 West Pender Street, Suite 102, Thunder Bay, Ontario, P7B 1R8. The Company’s820, Vancouver, British Columbia, V6E 4A4. Its registered office address is 700 - 595 Burrard Street, Vancouver, British Columbia, V7X 1S8. The Company's mailing address is 278 Bay Street, Suite 102, Thunder Bay, Ontario, P7B 1R8.

On August 21, 2007, the Company formed Minera Polymet Limitada (“Polymet”) as a limited liability company, under the laws of the Republic of Chile. On September 28, 2015, the Company changed Polymet’s incorporation from Limited Liability Company to a Closed Stock Corporation (“SpA”). As of the date of this Quarterly Report on Form 10-Q the Company owns 100% of Polymet, which holds its Chilean mineral property interests.

The Company is engaged in the business of mineral exploration in Chile with the objective to explore and, if warranted, develop mineral properties. All of the Company’s mineral concessions are located in the Candelaria iron oxide copper-gold (IOCG) belt of the coastal cordillera, in the Carrizal Alto Mining District, III Region of Atacama, Chile. The Company has three active copper-gold projects on two properties, namely the Farellón and Perth Projects both located on the Carrizal Property, and the Mateo Project located on the Mateo Property. In addition to holding these active properties, as an exploration company, the Company periodically stakes, purchases or options claims to allow time and access to fully consider the geological potential of claims.

The Company’s flagship project, the Farellón Project, is a mid-stagean early-stage exploration projectproperty consisting of eight mining concessions totaling 1,234 hectares.

Consistent with our historical practices, we continue to monitor our costs in Chile by reviewing our mineral claims to determine whether they possess the geological indicators to economically justify the capital to maintain or explore them. As at the time of the filing of this Quarterly Report on Form 10-Q, Polymet has two employees and engages independent consultants on as needed basis. Most of the Company’s support - such as vehicles, office, and equipment - is supplied under short-term contracts. The only long-term commitments that the Company has are for royalty payments on four of its mineral concessions - Farellón Alto 1 - 8, Quina 1 - 56, Exeter 1 - 54, and Che. These royalties are payable once exploitation begins. The Company is also required to pay property taxes that are due annually on all the concessions that are included in its properties.

The cost and timing of all planned exploration programs are subject to the availability of qualified mining personnel, such as consulting geologists, geo-technicians and drillers, and drilling equipment. Although Chile has a well-trained and qualified mining workforce from which to draw and few early-stage companies such as Red Metal are competing for the available resources, if the Company is unable to find the personnel and equipment needed at the prices that were budgeted for the programs, the Company might have to revise or postpone its exploration plans.

Results of Operations

SUMMARY OF FINANCIAL CONDITION

Table 1 summarizes and compares our financial condition at April 30,July 31, 2021, to the year ended January 31, 2021.

Table 1: Comparison of financial condition

Selected Financial Results

THREE AND SIX MONTHS ENDED APRIL 30,JULY 31, 2021 AND 2020

Our operating results for the three and six months ended April 30,July 31, 2021 and 2020, and the changes in the operating results between those periods are summarized in Table 2:

Table 2: Summary of operating results

Revenue. We did not generate any revenue during the three and six months ended April 30,July 31, 2021 and 2020. Due to the exploration rather than the production nature of our business, we do not expect to have significant operating revenue in the foreseeable future.

Operating expenses. Our operating expenses for the three and six months ended April 30,July 31, 2021 and 2020, and the changes between those periods are summarized in Table 3.

Table 3: Detailed changes in operating expenses

Our operating expenses increased by $263,160, or 1,104.0%, from $23,836 for the three-month period ended July 31, 2020, to $286,996 for the three-month period ended July 31, 2021. The increase in operating expenses during the three-month period ended July 31, 2021, was associated mainly with increased mineral exploration costs, which totaled $85,128, as opposed to $2,155 we incurred during the three-month period ended July 31, 2020, and included a payment of 2020/21 and 2021/22 property taxes on all our mineral exploration projects, and with increased professional fees, which, for the three-month period ended July 31, 2021, amounted to $81,622, as compared to $10,912 we incurred during the three-month period ended July 31, 2020. The increase in professional fees was mainly associated with increased legal fees required to assist us with listing our shares on the Canadian Securities Exchange (the “CSE”) through a filing of non-offering prospectus (the “Prospectus”) and other day-to-day legal advice.

In addition, during the three-month period ended July 31, 2021, we incurred $41,280 in consulting fees to our management, the companies controlled by our management, and to independent consultants; we did not have similar expenses during the three-month period ended July 31, 2020. Our general and administrative fees increased by $42,141 to $43,809, and included $33,898 in advertising and promotion fees, the expense we did not have in the comparative three-month period; our regulatory fees increased by $19,493 to $23,457 due to the extra filing and regulatory fees associated with the Unit and Receipt Offerings, as well as with the filing of our Prospectus.

Our operating expenses increased by $334,346, or 533.4%, from $62,685 for the six-month period ended July 31, 2020, to $397,031 for the six-month period ended July 31, 2021. The most significant changes in our operating expenses for the three-monthsix-month period ended April 30,July 31, 2021, as compared to the three-monthsix-month period ended April 30,July 31, 2020, were as follows:

·Our professional fees increased by $33,002,$103,712, or 328.3%494.7%, from $10,052$20,964 we incurred during the three-monthsix-month period ended April 30,July 31, 2020, to $43,054$124,676 we incurred during the three-monthsix-month period ended April 30,July 31, 2021. This increase was mainly associated with legal fees required to assist us with preparing the documents required for continuation from Nevada to BC, CanadaBritish Columbia and to carry out an Annual Special Meeting of our shareholders, as well as assistanceto assist us with listing our Unit Offering, which we closedshares on May 17, 2021,the CSE through a filing of non-offering prospectus (the “Prospectus”), and Subscription Receipts Offering, which, as of the date of this Quarterly Report on Form 10-Q has not been closed yet. 

·During the three-month period ended April 30, 2021, we incurred $27,809 in consulting fees to our management and the companies controlled by them. 

other day-to-day legal advice. 

·Our mineral and exploration expenses increased by $8,256, or 874.6%;$91,229, from $944$3,099 we incurred during the three-monthsix-month period ended April 30,July 31, 2020, to $9,200$94,328 we incurred during the three-monthsix-month period ended April 30,July 31, 2021. The higher mineral exploration expenses during the three-monthsix-month period ended April 30,July 31, 2021, were associated with the preparationpayment of 2020/21 and 2021/22 property taxes on all our mineral exploration projects, as well as with the costs to prepare of the Farellon Alto 1-8 concession for the drilling program we are planninghave planned for our Fiscal 2022 and 2023. 

·During the six-month period ended July 31, 2021, we incurred $69,089 in consulting fees to start inour management, the Summer of 2021.companies controlled by them, and to external consultants. We did not have similar expenses during the six-month period ended July 31, 2020. 

·Our regulatory fees decreasedincreased by $4,016,$15,477, or 57.3%141.1%, from $7,007$10,971 we incurred during the three-monthsix-month period ended April 30,July 31, 2020, to $2,991$26,448 we incurred during the three-monthsix-month period ended April 30,July 31, 2021. The higher regulatory fees, as compared to the comparative period, were associated with the extra filing and regulatory fees associated with the Unit and Receipt Offerings, as well as with the filing of our Prospectus. 

·Our general and administrative expenses increased by 15.4%299.2%, or $2,016$44,157 to $15,107$58,916 during the three-monthsix-month period ended April 30,July 31, 2021, as compared to $13,091$14,759 we incurred in general and administrative expenses during the comparative period ended April 30,July 31, 2020. The increase was associated mostly with our investor relation activities and automobileadministrative expenses of $5,431$39,329 and $2,825,$6,462, respectively (2020 - $Nil and $1,291)$9,403), and with increased value added tax, which, for the three-monthsix-month period ended April 30,July 31, 2021, totaled $1,260$4,004 (2020 - $97)$483). These expenses were in part offset by reducedIn addition, we spent $3,040 on our office and administrative expenses, which amounted to $1,741$3,755 on automobile expenses and $3,231, respectively$2,164 on bank charges (2020 - $4,793,$2,039, $1,533 and $6,120)$1,215 respectively). 

·OurThe salaries paid to the staff employed through our Chilean subsidiary decreasedincreased by $203,$2,093, or 2.6%16.4% to $7,495$14,873 from $7,698$12,780 we incurred during the three-monthsix-month period ended April 30,July 31, 2020. The stablechange in payroll expenses were a result of no changes in our staff employed by Polymet, with the only changes resultingresulted mainly from the customary adjustment for inflation in Chile and fluctuation of foreign exchange rates. 

Other items. To continue our operations, we were required to incur additional debt with our debt holders. Our notes payable carry 8% annual interest, which resulted in $21,827$45,903 in interest we accrued during the six-month period ended July 31, 2021, representing a $9,043 increase as compared to $36,860 in interest we accrued during the six-month period ended July 31, 2020. For the three-month period ended July 31, 2021, the interest expense was calculated to be $24,076, as opposed to $19,221 we accrued during the three-month period ended April 30, 2021, representing a $4,188 increase as compared to $17,639 in interest we accrued during the three-month period ended April 30,July 31, 2020.

During the comparative three-monthsix-month period ended April 30,July 31, 2020, we reversed an old debt which exceeded the statute of limitations as promulgated under Chilean Laws; the amount reversed was $74,336 and was recorded as forgiveness of debt. We did not have similar transactions during the three-monthsix-month period ended April 30,July 31, 2021.

During the three-month period ended April 30,July 31, 2021, we recorded $1,342$1,272 loss on foreign exchange fluctuations (2020 - $224$155), during the six-month period ended July 31, 2021, the loss on foreign exchange fluctuations was calculated to be $2,614 (2020 - $69 gain).

Comprehensive income/(loss). Our comprehensive loss for the three-month period ended April 30,July 31, 2021, was $144,784$352,160 as compared to $29,003$27,311 comprehensive incomeloss we recorded for the three-month period ended April 30,July 31, 2020. During the three-month period ended April 30,July 31, 2021, the comprehensive loss included $11,580$39,816 loss associated with the foreign exchange translation of the carried balances denominated in other than our functional currencies. During the comparative three-month period ended April 30,July 31, 2020, the comprehensive loss included $15,901 income associated with the foreign exchange translation of the carried balances denominated in other than our functional currencies.

On a year-to-date basis, our comprehensive loss was $496,944 as compared to $1,692 comprehensive income we recorded for the six-month period ended July 31, 2020. During the six-month period ended July 31, 2021, the comprehensive loss included $51,396 loss associated with the foreign exchange translation of the carried balances denominated in other than our functional currencies. During the comparative six-month period ended July 31, 2020, the comprehensive income included $10,931$26,832 income associated with the foreign exchange translation of the carried balances denominated in other than our functional currencies.

Liquidity and Capital Resources

Table 4: Working capital

As of April 30,July 31, 2021, we had a cash balance of $101,694,$908,257 of which $777,605 was held in trust until such time that our shares are listed on the CSE, our working capital was represented by a deficit of $143,010$53,954 and cash used in operations totaled $86,211$403,182 for the period then ended.

We did not generate cash flows from our operating activities to satisfy our cash requirements for the three-monthsix-month period ended April 30,July 31, 2021. The amount of cash that we have generated from our operations to date is significantly less than our current and long-term debt obligations, including our debt under notes and advances payable. To service our debt, we rely mainly on attracting cash through debt or equity financing.

Cash Flow

Table 5 summarizes our sources and uses of cash for the threesix months ended April 30,July 31, 2021 and 2020.

Table 5: Summary of sources and uses of cash

Net cash used in operating activities

During the threesix months ended April 30,July 31, 2021, we used net cash of $86,211$403,182 in operating activities. We used $109,382$385,768 to cover our cash operating costs, $2,240$65,897 to prepay our future expenses, and $13,597$5,136 and $1,253 to reduce amounts we owed to our vendors.vendors and accrued liabilities, respectively. These uses of cash were offset by $28,598$54,872 increase to the amounts due to our related parties mainly for consulting services provided by them to our Company, and by $10,410 increase to our accrued liabilities.Company.

During the threesix months ended April 30,July 31, 2020, we used net cash of $43,967$61,954 in operating activities. We used $38,568$62,504 to cover our cash operating costs, $16,234$788 to reduce our outstanding vendor payables, $1,663 to reduce our accrued liabilities, and $200$2,032 to prepay our future expenses. These uses of cash were offset by $11,032 and $3 increases$5,033 increase to the amounts due to our accrued liabilities and related party payables, respectively.parties.

Certain non-cash changes included in the net income/(loss)loss for the period

During the three-monthsix-month period ended April 30,July 31, 2021, our outstanding notes payable to related parties resulted in the accrual of $21,827$45,903 in interest. In addition, we recorded $1,995$3,877 in amortization of our work trucks used for Chilean operations.operations, and $10,000 on investor relations activities, which were paid for by issuing 29,411 shares of our common stock at $0.34 per share.

During the three-monthsix-month period ended April 30,July 31, 2020, our outstanding notes payable to related parties resulted in the accrual of $17,172 in interest, and our notes payable to non-related party accumulated $467$36,860 in interest. In addition, we recorded $57$112 in amortization of our work truck used for Chilean operations. During the three-monthsix-month period ended April 30,July 31, 2020, we recorded $74,336 forgiveness of debt on reversal of old debt which exceeded the statute of limitation promulgated under Chilean Law.

Net cash provided by financing activities

During the threesix months ended April 30,July 31, 2021, we borrowed $34,202 from Richard Jeffs, our major shareholder. The loan is unsecured, bears interest at 8% per annum, compounded monthly, and is payable on or after August 31, 2022. In addition, we received $87,721 from$459,615 on subscriptions to units of our common stock as part of our Unit Offering which we closed on May 17, 2021, and $11,938$777,669 we received in subscriptions to our SRSubscription Receipts Offering, which iswe closed on June 15, 2021. The funds received from the Subscription Receipts Offering are held in trust, with their release being contingent upon us listing our shares on the Canadian Securities Exchange.CSE.

During the threesix months ended April 30,July 31, 2020, we borrowed $188,922$224,728 (CAD$250,000)300,000) and $23,000 from Mr. Richard Jeffs, our major shareholder. In addition, our CEO advanced us $1,454 as part of vendor payments she made on our behalf. The loan isloans are unsecured, bearsbear interest at 8% per annum, compounded monthly, and isare payable on or after August 31, 2022.

Going Concern

The condensed consolidated financial statements included in this Quarterly Report have been prepared on a going concern basis, which implies that we will continue to realize our assets and discharge our liabilities in the normal course of business. We have not generated any significant revenues from mineral sales since inception, have never paid any dividends and are unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. Our continuation as a going concern depends upon the continued financial support of our shareholders, our ability to obtain necessary debt or equity financing to continue operations, and the attainment of profitable operations. Our ability to achieve and maintain profitability and positive cash flow depends upon our ability to locate profitable mineral claims, generate revenue from mineral production and control our production costs. Based upon our current plans, we expect to incur operating losses in future periods, which we plan to mitigate by controlling our operating costs and by sharing mineral exploration expenses through joint venture agreements, if possible. At April 30,July 31, 2021, we had a working capital deficit of $143,010$53,954 and accumulated losses of $9,877,350.$10,189,694. These factors raise substantial doubt about our ability to continue as a going concern. We cannot assure you that we will be able to generate significant revenues in the future. Our condensed consolidated financial statements do not give effect to any adjustments that would be necessary should we be unable to continue as a going concern and therefore be required to realize our assets and discharge our liabilities in other than the normal course of business and at amounts different from those reflected in our financial statements.

Unproved Mineral Properties

Table 6: Active properties