CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED MAY 31, (Unaudited Prepared by Management)

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1 CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited Prepared by Management) STATEMENTS OF FINANCIAL POSITION STATEMENTS OF COMPREHENSIVE LOSS STATEMENTS OF CASH FLOWS STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY NOTES TO FINANCIAL STATEMENTS

2 Suite 1908, 925 West Georgia Street Vancouver, BC V6C 3L2 Canada T F NOTICE OF NO AUDITOR REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS The accompanying unaudited condensed consolidated interim financial statements of San Marco Resources Inc. (the Company ) for the six months ended May 31, 2014 have been prepared by, and are the responsibility of the Company s management. The Company s independent auditor has not performed a review of these 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.

3 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION ASSETS May 31, 2014 November 30, 2013 Current assets Cash $ 224,070 $ 245,323 Marketable securities (Note 3) 212, ,551 Receivables (Note 4) 20, ,458 Prepaid expenses 18,640 8, , ,040 Non-current assets Reclamation deposit (Note 5) 2,000 2,000 Equipment (Note 7) 19,582 28,367 Exploration advances (Note 6) 3,586 8,196 Mineral properties (Note 6) 1,581,360 3,464,288 Total assets $ 2,081,814 $ 4,025,891 LIABILITIES AND EQUITY Current liabilities Accounts payable and accrued liabilities (Note 8) $ 62,616 $ 116,692 Shareholders equity Share capital (Note 10) 9,142,462 8,763,950 Equity reserves (Note 10) 1,417,281 1,349,131 Deficit (8,540,545) (6,203,882) 2,019,198 3,909,199 Nature and continuance of operations (Note 1) Subsequent event (Note 15) $ 2,081,814 $ 4,025,891 APPROVED AND AUTHORIZED BY THE DIRECTORS ON JULY 29, 2014: C.PRENTER R.STUART ANGUS The accompanying notes are an integral part of these condensed consolidated interim financial statements.

4 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS Three Months Ended May 31, Six Months Ended May 31, EXPENSES Accounting and audit fees $ 13,292 $ 9,376 $ 22,134 $ 20,082 Depreciation (Note 7) 4,505 5,116 9,174 10,248 Foreign exchange 5,933 5,137 (912) 16,559 Insurance 6,556 6,555 13,125 13,113 Investor relations 5,920 15,000 5,920 60,000 Legal and professional fees 15,924 21,266 20,132 27,162 Management and administration fees (Note 9) 50,279 70, , ,718 Office and administration expenses 11,488 20,716 28,067 51,066 Property investigation 36,962 9,164 41,472 11,037 Rent 6,900 10,575 15,000 19,500 Share-based payments (Note 10) 15,046 62,376 68, ,688 Transfer agent and filing fees 6,079 13,063 16,195 23,502 Travel 3,148 5,637 8,458 22,518 Operating expenses (182,032) (254,323) (349,115) (595,193) Interest income Management income , ,717 2,775 59,099 Loss on disposal of equipment (Note 7) - (1,994) - (3,655) Unrealized loss (gain) on marketable securities (Note 3) 72,862 (100,309) 48,846 (117,476) Write-off of mineral properties (Note 6) (2,046,463) - (2,046,463) - LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD $ (2,155,615) $ (296,591) $ (2,336,663) $ (654,450) Basic and diluted loss per common share $ (0.04) $ (0.01) $ (0.04) $ (0.01) Weighted average number of common shares outstanding 56,595,734 53,062,853 54,999,879 52,441,362 The accompanying notes are an integral part of these condensed consolidated interim financial statements.

5 CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS Three Months Ended May 31, Six Months Ended May 31, OPERATING ACTIVITIES Loss and comprehensive loss for the period $ (2,155,615) $ (296,591) $ (2,336,663) $ (654,450) Items not affecting cash: Depreciation 4,505 5,116 9,174 10,248 Loss on disposal of equipment - 1,994-3,655 Share-based payments 15,046 62,376 68, ,688 Unrealized loss (gain) on marketable securities (72,862) 100,309 (48,846) 117,476 Write-off of mineral properties 2,046,463-2,046,463 - Changes in non-cash working capital items: Receivables 79,874 (34,256) 85,278 (18,963) Prepaid expenses 8,546 6,026 (9,932) (26,870) Accounts payable and accrued liabilities (3,345) (72,750) 11,880 (53,236) Net cash used in operating activities (77,388) (227,776) (174,496) (435,452) FINANCING ACTIVITIES Proceeds from issuance of shares 400, , , ,000 Share issuance costs (23,238) (1,515) (23,238) (1,515) Net cash provided by financing activities 376, , , ,485 INVESTING ACTIVITIES Exploration advances 68 (82,691) 4,610 (90,177) Mineral properties (78,808) (791,848) (356,692) (1,050,133) Recovery of costs (Note 6) (139,261) 1,395, ,952 1,405,309 Acquisition of equipment - (6,042) (389) (11,357) Net cash used in investing activities (218,001) (514,748) (223,519) 253,642 INCREASE (DECREASE) IN CASH 81, ,457 (21,253) 66,675 CASH, BEGINNING OF THE PERIOD 142, , , ,171 CASH, END OF THE PERIOD $ 224,070 $ 857,846 $ 224,070 $ 857,846 Supplemental disclosures with respect to cash flows (Note 13) The accompanying notes are an integral part of these condensed consolidated interim financial statements.

6 CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY Number of Common Shares Share Capital Equity Reserves Deficit Total Equity Balance at December 1, ,806,060 $ 8,515,465 $ 1,133,275 $ (4,546,250) $ 5,102,490 Private placement 1,562, , ,000 Issuance costs - (1,515) - - (1,515) Share-based payments , ,688 Loss and comprehensive loss for the period (654,450) (654,450) Balance at May 31, ,725,252 8,763,950 1,319,963 (5,200,700) 4,883,213 Private placement Issuance costs Share-based payments ,168-29,168 Loss and comprehensive loss for the period (1,003,182) (1,003,182) Balance at November 30, ,368,560 8,763,950 1,349,131 (6,203,882) 3,909,199 Private placement 8,000, , ,000 Issuance costs - (23,238) - - (23,238) Shares issued Cuatro de Mayo project 50,000 1, ,750 Share-based payments ,150-68,150 Loss and comprehensive loss for the period (2,336,663) (2,336,663) Balance at May 31, ,418,560 $ 9,142,462 $ 1,417,281 $ (8,540,545) $ 2,019,198 The accompanying notes are an integral part of these condensed consolidated interim financial statements.

7 1. NATURE AND CONTINUANCE OF OPERATIONS San Marco Resources Inc. ( the Company ) was incorporated on September 27, 2005 under the Business Corporations Act of British Columbia. The Company s head office is Suite West Georgia Street, Vancouver, BC, V6C 3L2. The registered and records office address is Suite Howe Street, Vancouver, BC, V6C 2T5. The condensed consolidated interim financial statements of the Company are presented in Canadian dollars unless otherwise indicated, which is the functional currency of the parent company and its subsidiaries. The Company is engaged in the acquisition, exploration and advancement of mineral properties in Mexico and Canada. The Company is in the process of exploring its mineral properties and has not yet determined whether these properties contain resources that are economically recoverable. The realization of amounts shown for mineral property and related deferred costs is dependent upon the discovery and exploitation of economically recoverable resources, the ability of the Company to obtain necessary financing to complete development, and attaining future profitable production or proceeds from the disposition such properties. These condensed consolidated interim financial statements have been prepared by management on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. At May 31, 2014, the Company had a working capital of $412,670, had not yet achieved profitable operations and has an accumulated deficit of $8,540,545 since its inception. A number of alternatives including, but not limited to selling an interest in one or more of its properties or completing a financing, are being evaluated with the objective of funding ongoing activities and obtaining additional working capital. The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future and repay its liabilities arising from normal business operations as they become due. These uncertainties may cast significant doubt on the entity s ability to continue as a going concern. These condensed consolidated interim financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES Statement of compliance These condensed consolidated interim financial statements, including comparatives, have been prepared in accordance with International Accounting Standards ( IAS ) 34 Interim Financial Reporting, using accounting policies consistent with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ) and Interpretations issued by the International Financial Reporting Interpretations Committee ( IFRIC ). These condensed consolidated interim financial statements should be read in conjunction with the Company s audited consolidated financial statements as at and for the year ended November 30, 2013, which have been prepared in accordance with International Financial Reporting Standards ( IFRS ). These financial statements were authorized for issue by the Board of Directors on July 29, 2014.

8 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (cont d ) Basis of consolidation and presentation The condensed consolidated interim financial statements have been prepared on a historical cost basis except for certain financial instruments classified as financial instruments at fair value through profit and loss, which are stated at fair value. In addition, these financial statements have been prepared using the accrual basis of accounting except for cash flow information. All dollar amounts presented are in Canadian dollars unless otherwise specified. These condensed consolidated interim financial statements incorporate the financial statements of the Company and its controlled subsidiaries. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The condensed consolidated interim financial statements include the accounts of the Company and its direct wholly-owned subsidiaries B.C. Limited and San Marco Resources Mexico S.A. de C.V. All inter-company transactions and balances have been eliminated upon consolidation. Use of estimates and judgments The preparation of the condensed consolidated interim financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Company s accounting policies and the key sources of estimation uncertainty are consistent as those that applied to the Company s financial statements as at and for the year ended November 30, Significant accounting policies The accounting policies applied by the Company in these unaudited condensed interim financial statements are consistent with those applied by the Company in its financial statements as at and for the year ended November 30, The following new standards became effective on January 1, 2013: IFRS 10, Consolidated Financial Statements; IFRS 11, Joint Arrangements; IFRS 12, Disclosure of Involvement with Other Entities; IFRS 13, Fair Value Measurement; IAS 27, Separate Financial Statements; and IAS 28, Investments in Associates and Joint Ventures These standards did not have a significant impact on the Company s condensed consolidated interim financial statements. New standards not yet adopted Accounting Standards Issued and Effective January 1, 2014: IAS 32 Financial Instruments: Presentation clarifies the application of the offsetting rules and requires additional disclosure on financial instruments subject to netting arrangements. The following standard has been issued but is not yet effective (deferred indefinitely): IFRS 9 Financial Instruments standard that replaces IAS 39 for classification and measurement of financial assets.

9 3. MARKETABLE SECURITIES The marketable securities are comprised of the 1,400,000 shares received from Patriot Minefinders Inc., valued at $212,397 ( $163,551), in reference to the Option Agreement for La Buena property (Note 6). The Company recorded an unrealized gain (loss) of $48,846 (November 30, $(99,078)) due to mark-to-market valuation at May 31, RECEIVABLES The Company s receivables arise from two main sources: goods and services tax ( GST ) receivable due from Canadian government taxation authorities and value added tax ( VAT ) due from Mexican government taxation authorities. The receivables balance is broken down as follow: May 31, 2014 November 30, 2013 VAT receivable $ 4,672 $ 98,487 GST receivable 15,507 2,020 Management income receivable - 4,951 $ 20,179 $ 105,458 All amounts are short-term and the net carrying value of receivables is considered a reasonable approximation of fair value. The Company s receivables are all considered current. 5. RECLAMATION DEPOSIT On July 17, 2013 the Company renewed a $2,000 ( $2,000) reclamation deposit with respect to the Alwin Copper Property (Note 6). This deposit bears interest at 0.15% per annum and matures on July 18, 2014.

10 6. MINERAL PROPERTIES ALWIN PROPERTY TECOMATE PROJECT LA BUENA PROJECT LOS CARLOS PROJECT ANGELES PROJECT CUATRO DE MAYO PROJECT TOTAL MINERAL PROPERTIES Balance at November 30, 2012 $ 1 $ 2,015,304 $ 1,032,109 $ 737,836 $ 250,697 $ - $ 4,035,947 Cash payment ,676-88,676 Sampling, prospecting, study ,419-89, ,463 Geophysics, topographic, mapping, gravity survey ,581 11,822 5, ,358 Drilling ,309 14, , ,359 Field supplies and on-site expenses , ,342-93,442 Mineral rights - 26,167 44,941 17,767 3,060-91,935 Geological consulting ,867 21, , ,684 Travel expenses , , ,622 Property development, field wages - 4, ,481 2,740 79, ,672 Total for the year - 31,159 1,172,456 70,314 1,092,282-2,366,211 Recovery of costs (cash) - - (1,194,664) - (931,802) - (2,126,466) Recovery of costs (shares) - - (83,774) (83,774) Write-down of mineral properties (727,630) - - (727,630) Balance at November 30, ,046, ,127 80, ,177-3,464,288 Cash payment ,549 5,031 21,580 Shares issued ,750 1,750 Sampling, prospecting, study - - 3,037 1, ,385 Drilling, preparation ,621 5, ,062 Field supplies and on-site expenses - - 6,839 1,311 3,961 1,997 14,108 Mineral rights ,372 11,644 2,797 12,750 52,563 Geological consulting ,652 5,890 11,733 2,534 41,809 Travel expenses - - 5, , ,988 Property development, field wages , ,370 1,288 40,242 Total for the period ,773 26,757 55,151 25, ,487 Recovery of costs (cash) - - (136,029) - 7,077 - (128,952) Write-off of mineral properties - (2,046,463) (2,046,463) Balance at May 31, 2014 $ 1 $ - $ 974,871 $ 107,277 $ 473,405 $ 25,806 $ 1,581,360

11 6. MINERAL PROPERTIES (cont d ) Title to mining properties Title to mining properties involves certain inherent risks, particularly in foreign jurisdictions, including the difficulties of determining the validity of title and the potential for problems arising from numerous transfers of historical mining properties. The Company has diligently investigated the rights of ownership to all of the mineral concessions in which it has an interest and, to the best of its knowledge, such ownership rights are valid and in good standing. However, this should not be construed as a guarantee of title. The concessions may be subject to prior claims, agreements or transfers, and rights of ownership may be affected by undetected defects. Exploration Advances Included in this amount are advances to geologists used for exploration expenses. The amounts on deposit at May 31, 2014 were $3,586 ( $8,196). Alwin Pursuant to an option agreement dated December 7, 2005, the Company acquired an undivided 100% interest in certain mineral claims situated in the Kamloops B.C. area. The claims are subject to a 2% net smelter return ( NSR ) royalty. Under the terms of the agreement the Company has the option to purchase 75% of the NSR for $1.5 million during a five year period commencing from the day of commercial production. As consideration for the property, the Company paid $50,000 and issued 125,000 common shares with a value of $31,250. Tecomate During the year ended November 30, 2010, the Company acquired the Tecomate project in Mexico. The purchase price consisted of US $50,000 and 400,000 common shares of the Company (issued for a value of $212,000). The Company has granted the Vendor a 1% NSR on the property and all concessions subsequently acquired by the Company within an area extending five kilometers from the outer perimeter of the core concession. On June 1, 2014, the Company announced it has elected to discontinue its interest in the Tecomate project and therefore, the related acquisition and deferred exploration costs were written-off to operations. La Buena During the year ended November 30, 2010, the Company acquired the La Buena project in Mexico. The purchase price consisted of US $125,000 (paid), 200,000 common shares of the Company (issued for a value of $110,000) and 300,000 share purchase warrants (issued for a value of $84,133). The warrants were exercisable at a price of $0.70 per share until January 8, 2013 (expired unexercised). The Company shall also pay US $1,000,000 if a minimum of 1.25 million gold equivalent ounces (measured and indicated) are discovered. At the Company s option, this payment may be in cash or shares of the Company. The Company has granted the Vendor a sliding scale NSR of 1.5% to 2.5% depending on the gold price between US $800 and US $950 per ounce. The Company has the option to re-purchase 50% of the royalty for US $2,000,000.

12 6. MINERAL PROPERTIES (cont d ) La Buena (cont d ) During the year ended November 30, 2011, the Company acquired a concession adjacent to its La Buena project, in Mexico. The purchase price consisted of US $25,000 and 100,000 common shares of the Company (issued for a value of $36,000). The Company has granted the Vendor a sliding scale NSR of 1.5% to 2.5% depending on the gold price between US $800 and US $950 per ounce. The concession is considered part of La Buena project acquired in January 2010, for the purposes of determining whether the project contains more than 1.25 million gold equivalent ounces (in mineral reserves and measured and indicated resources) whereupon a further US $1 million payment must be made to the vendor pursuant to the January 2010 acquisition. Payment may be cash or shares at the Company s election. On February 28, 2012, the Company granted an option to Skanderbeg Capital Partners Inc. to acquire a 50% interest in La Buena property. Skanderbeg transferred its option to a US publicly traded company, Patriot Minefinders Inc., which may earn a 50% interest in La Buena property. On December 31, 2012, the Company received notification from Patriot Minefinders Inc. that they will not be proceeding with the La Buena property option. Consequently, this option terminated. On January 29, 2013, the Company entered into a Settlement and Release Agreement with Patriot Minefinders Inc. to terminate the Agreement in consideration of a cash payment of US $10,000 (received) and 400,000 common shares (issued Note 3) of Patriot Minefinders. On March 1, 2013, the Company granted an option to Exeter Resource Corporation to acquire a 60% interest in La Buena property. Should Exeter earn fully into the option, Exeter would provide $15,000,000 of exploration funding and $650,000 in cash payments over 5 years. All expenditures and cash payments can be accelerated at any time at Exeter s election. Details of the business arrangements are as follows: $1,400,000 of exploration funding, $150,000 cash payment towards a share subscription (received Note 10) and 2,500 meters of drilling are firm commitments by March 1, 2014; Additional $1,600,000 in expenditures and $150,000 cash payment by March 1, 2015; Additional $2,700,000 in expenditures and $100,000 cash payment by March 1, 2016; Additional $3,500,000 in expenditures and $100,000 cash payment by March 1, 2017; Additional $5,800,000 in expenditures and $150,000 cash payment by March 1, 2018; 60% earn-in must include a preliminary economic assessment as defined by National Instrument ( NI ) standards; The Company will be the operator until $6,000,000 of exploration expenditures are completed; All cash payments are made by way of private placement purchase by Exeter of the Company s common shares at a 25% premium to the market price at the time the payment is due. Exeter advised the Company that it would not continue into the second year expenditures to acquire interests in the La Buena property and therefore withdrew from the option agreement.

13 6. MINERAL PROPERTIES (cont d ) Los Carlos During the year ended November 30, 2011, the Company was granted an option to acquire a 100% interest in the Los Carlos Property in Mexico for US $1,800,000 over 4 years, which US $60,000 was paid. This option was terminated on October 29, On November 1, 2012, the Company was granted a new option to acquire 100% interest in the Los Carlos Property in Mexico for US $500,000 over 3 years as follow: Payment Schedule $ Amount November 1, 2012 US $15,000 (paid) May 1, 2013 US $20,000 November 1, 2013 US $35,000 May 1, 2014 US $50,000 November 1, 2014 US $50,000 May 1, 2015 US $100,000 November 1, 2015 US $230,000 Total US $500,000 The underlying vendor will retain a 1.5% NSR royalty which can be purchased by the Company for US $1,000,000. If the Company exercises the option and discovers proven and probable resources of at least 250,000 ounces of gold, a bonus payment of US $500,000 must be paid. An additional bonus of US $500,000 must be paid if proven and probable resources of at least 500,000 ounces of gold are discovered. On April 29, 2013, the Company terminated the option to purchase a 100% interest in Los Carlos Property. Consequently, all related mineral property and deferred exploration costs totaling $727,630 were written-off to operations. The Company will, however, proceed on its wholly owned Los Carlos II property, acquired by staking in April 2012.

14 6. MINERAL PROPERTIES (cont d ) Angeles On May 29, 2012, the Company was granted an option to acquire 100% interest in the Angeles property in Mexico for US $1,000,000 over 4 years and 2 months. The underlying vendor will retain a 1.5% NSR royalty which can be purchased by the Company for US $1,500,000. If, prior to the exercise of the option, the Company discovers proven reserves of at least 1 million troy ounces of gold, a bonus payment of US $1,500,000 must be paid within 12 months of exercising the option. Should one of the Optionors be successful in an application to reinstate a cancelled concession adjacent to the property and the Company exercises the option, a further US $500,000 must be paid to acquire such reinstated concession. The payment schedule was renegotiated on April 21, 2014 as follow: Payment Schedule $ Amount July 29, 2012 US $15,000 (paid) January 29, 2013 US $20,000 (paid) July 29, 2013 US $25,000 (paid) May 1, 2014 US $15,000 (paid) November 1, 2014 US $15,000 May 1, 2015 US $15,000 November 1, 2015 US $21,000 May 1, 2016 US $27,000 November 1, 2016 US $47,000 May 1, 2017 US $100,000 November 1, 2017 US $100,000 May 1, 2018 US $100,000 November 1, 2018 US $100,000 May 1, 2019 US $400,000 Total US $1,000,000 On November 23, 2012, the Company was granted an option to acquire 100% interest in La Gloria concession (part of Angeles project) for US $65,000 over 1 year as follow: Payment Schedule $ Amount November 23, 2012 US $25,000 (paid) May 23, 2013 US $10,000 (paid) November 23, 2013 US $30,000 (paid) Total US $65,000 In November 2013, the Company completed all payments due per the option agreement, and chose to exercise its option for the acquisition of a 100% interest in La Gloria concession.

15 6. MINERAL PROPERTIES (cont d ) Angeles (cont d ) On March 1, 2013, the Company granted an option to Exeter Resource Corporation to acquire a 70% interest in Angeles property. Should Exeter earn fully into the option, Exeter would provide $10,000,000 of exploration funding and $500,000 in cash payments over 4 years to earn 51%, and an additional $10,000,000 of exploration expenditures and $450,000 in cash payments over the following 3 years to earn an additional 19%. All expenditures and cash payments can be accelerated at any time at Exeter s election. Details of the business arrangements are as follows: $1,000,000 of exploration funding (received), $100,000 cash payment towards a share subscription (received Note 10) and 2,500 meters of drilling (completed) are firm commitments by December 31, 2013; Additional $1,500,000 in expenditures and $100,000 cash payment by December 31, 2014; Additional $3,000,000 in expenditures and $150,000 cash payment by December 31, 2015; Additional $4,500,000 in expenditures and $150,000 cash payment by December 31, 2015; Additional $10,000,000 in exploration expenditures and $450,000 cash payments from January 1, 2017 to March 31, 2020; 70% earn-in must include a preliminary economic assessment or preliminary feasibility study as defined by NI standards. The Company will be the operator until the 51% earn-in; All cash payments are made by way of private placement purchase by Exeter of the Company s common shares at a 25% premium to the market price at the time the payment is due. Exeter advised the Company that it would not continue into the second year expenditures to acquire interests in the Angeles property and therefore withdrew from the option agreement.

16 6. MINERAL PROPERTIES (cont d ) Cuatro de Mayo On May 13, 2014, the Company was granted an option to acquire 100% interest in the Cuatro de Mayo property in Mexico for US $2,000,000 over 5 years as follow: Payment Schedule $ Amount May 13, 2015 US $10,000 November 13, 2015 US $10,000 May 13, 2016 US $10,000 November 13, 2016 US $25,000 May 13, 2017 US $50,000 November 13, 2017 US $100,000 May 13, 2018 US $200,000 November 13, 2018 US $810,000 May 13, 2019 US $785,000 Total US $2,000,000 As part of the option agreement, the Company issued 50,000 common shares (for a value of $1,750). The underlying vendor will retain a 3% NSR royalty, which 1% of this NSR can be purchased by the Company for US $1,500,000. If the Company exercises its option and discovers 1 million or more gold-equivalent ounces defined in the Proven and Probable Reserve categories according to a NI technical report, a bonus payment of US $500,000 must be paid.

17 7. EQUIPMENT Furniture and Equipment Computer Equipment Computer Software Vehicles Total Costs Balance, December 1, 2012 $ 1,501 $ 37,842 $ 39,388 $ 34,593 $ 113,324 Additions Disposals - - 5,309 (9,636) 9,312 (6,440) ,621 (16,076) Balance, November 30, ,501 33,515 42,260 34, ,869 Additions Balance, May 31, ,501 33,515 42,649 34, ,258 Accumulated depreciation Balance, December 1, ,421 39,267 17,006 75,392 Depreciation for the year 300 7,046 6,151 7,034 20,531 Disposals - (5,981) (6,440) - (12,421) Balance, November 30, ,486 38,978 24,040 83,502 Depreciation for the period 150 3,384 1,880 3,760 9,174 Balance, May 31, ,148 22,870 40,858 27,800 92,676 Carrying amounts As at December 1, 2012 $ 803 $ 19,421 $ 121 $ 17,587 $ 37,932 As at November 30, ,029 3,282 10,553 28,367 As at May 31, ,645 1,791 6,793 19, ACCOUNTS PAYABLES AND ACCRUED LIABILITIES May 31, 2014 November 30, 2013 Accounts payables $ 62,616 $ 50,580 Accrued liabilities - 66,112 Total $ 62,616 $ 116,692

18 9. RELATED PARTY TRANSACTIONS These financial statements include the financial statements of San Marco Resources Inc. and its subsidiaries listed in the following table: Name of Subsidiary Country of Incorporation Ownership Interest Principal Activity San Marco Resources Mexico S.A. de C.V. Mexico 100% Mineral Exploration B.C. Limited Canada 100% Holding Company During six months ended May 31, 2014, the Company entered into the following transactions with related parties: a) Paid or accrued $45,000 (2013 $60,000) for management fees to an officer and director of the Company. b) Paid or accrued $41,500 ( $48,083) for management fees to an officer of the Company. c) Share-based payments of the options granted to directors and officers are $65,777 ( $144,980). 10. SHARE CAPITAL AND EQUITY RESERVES a) Authorized b) Issued Unlimited number of common shares without par value During the six months ended May 30, 2014, the following events occurred: The Company issued 8,000,000 units at $0.05 per unit for gross proceeds of $400,000 less finders fees of $16,590. Each unit consisted of one common share and one non-transferable warrant to purchase a further share for three years at a price of $0.05 within the first year or $0.10 within the second and third years. All common shares issued in connection with this financing, including common shares issued on exercise of the warrants, are subject to a four month restricted resale period expiring on August 24, The warrants expire on April 24, 2017 and have an acceleration provision such that the expiry date can be reduced to 30 calendar days after notice thereof if the closing price of the Company's common shares equals or exceeds $0.20 for 15 consecutive trading days after the expiry of the four-month restricted resale period. During the year ended November 30, 2013, the following events occurred: The Company completed a private placement with Exeter Resource Corporation and issued 1,562,500 shares at $0.16 per share for gross proceeds of $250,000. The proceeds from the placement represented the initial payments due from Exeter in connection with the options granted to Exeter to acquire interests in the Company s La Buena and Angeles properties (Note 6).

19 10. SHARE CAPITAL AND EQUITY RESERVES (cont d ) c) Stock options The Company has a stock option plan whereby the Company may from time to time, in accordance with the TSX Venture Exchange ( Exchange ) requirements, grant to directors, officers, employees and consultants options to purchase common shares of the Company provided that the number of options granted do not exceed 10,673,000. Under the plan, the exercise price of each option shall not be less than the market price of the Company s stock as calculated immediately preceding the day of the grant. The options can be granted for a maximum of 10 years and are subject to vesting provisions determined by the Board of Directors. The Company s stock option transactions are as follows: Number of Stock Options Weighted Average Exercise Price Outstanding, December 1, ,440,000 $ 0.18 Granted 475, Cancelled (75,000) 0.13 Outstanding, November 30, ,840, Granted 2,100, Cancelled (440,000) 0.17 Outstanding, May 31, ,500,000 $ 0.16 Options exercisable at May 31, ,450,000 $ 0.17 Weighted average fair value per option granted for the period $ 0.03 As at May 31, 2014, the following stock options were outstanding: Number of Options Outstanding Exercise Price Expiry Date 265, July 20, , October 26, , December 31, ,030, May 9, , September 8, , September 21, , September 30, ,300, November 14, , September 30, , April 16, ,100, December 8, ,500,000

20 10. SHARE CAPITAL AND EQUITY RESERVES (cont d ) c) Stock options (cont d ) The fair value of stock options granted to directors, officers and employees during the six months ended May 31, 2014 was $63,000 ( $15,750) and the fair value of stock options granted to a consultant during the same period was $Nil ( $18,000). The Company recognized $53,104 ( $124,312) of share-based payments relating to stock options that vested during the six month period. The fair value of each option grant was estimated as at the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions: Risk free interest rate 1.80% 1.17% Expected life of options 5 years 3.4 years Expected dividend yield 0% 0% Expected stock price volatility % % d) Warrants The Company s warrant transactions are as follows: Number of Warrants Weight Average Exercise Price Balance, December 1, ,665,372 $ 0.26 Expired (8,706,673) 0.30 Balance, November 30, ,958, Granted 8,000, Expired (3,698,700) 0.26 Balance, May 31, ,260,000 $ 0.12 As at May 31, 2014, the following share purchase warrants were outstanding: Number of Warrants Exercise Price Expiry Date 3,060, July 11, ,200, August 9, ,000, April 24, ,260,000

21 11. CAPITAL MANAGEMENT The objective when managing capital is to safeguard the Company s ability to continue as a going concern, so that it can continue to provide adequate returns to shareholders, benefits to other stakeholders and to have sufficient funds on hand to meet the Company s exploration plans to ensure the on-going growth of the business. The Company considers the items in the shareholders equity as capital. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of its underlying assets. In order to maintain or adjust capital structure, the Company may issue new shares through private placements, sell assets, incur debt, or return capital to shareholders. As of May 31, 2014, the Company is not subject to externally imposed capital requirements. 12. FINANCIAL INSTRUMENTS RISK EXPOSURE AND MANAGEMENT As at May 31, 2014, the carrying values of reclamation deposit, receivables and accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments. Cash and marketable securities are measured at fair value. The Company is exposed to various financial instrument risks and assesses the impact and likelihood of this exposure. These risks include liquidity risk, credit risk, foreign currency risk, interest rate risk and price risk. Where material, these risks are reviewed and monitored by the Board of Directors. (i) Liquidity risk Liquidity risk is managed by the Company by maintaining sufficient cash balances to meet current working capital requirements. The Company is considered to be in the exploration stage and is dependent on obtaining regular funding in order to continue its exploration programs. Despite success in acquiring previous funding, there is no guarantee of obtaining future funding. The Company s cash is invested in business accounts with qualified institutions in Canada and are available on demand for the Company s programs. The Company is not invested in any asset backed commercial paper or auction rate securities. (ii) Credit risk The Company s credit risk is primarily attributable to its liquid financial assets and would arise from the nonperformance by counterparties of contractual financial obligations. The Company limits its exposure to credit risk on liquid assets by maintaining its cash and reclamation deposit with high-credit quality financial institutions. Receivables are mainly due from government agencies in Canada and Mexico. (iii) Foreign currency risk The Company s mineral properties are located in Mexico, therefore the majority of work carried out in exploring and developing these properties are paid in Mexican pesos. Certain administrative costs incurred in Mexico are paid in US dollars.

22 12. FINANCIAL INSTRUMENTS RISK EXPOSURE AND MANAGEMENT (cont d ) (iii) Foreign currency risk (cont d ) The operating results and the financial position of the Company are reported in Canadian dollars. The Company s cash, receivables, accounts payable and accrued liabilities are held in several currencies and therefore the fluctuations of the operating currencies in relation to the Canadian dollar will, consequently, have an impact upon the reported results of the Company and may also affect the value of the Company s assets and liabilities. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risk. (iv) Interest risk The Company invests its cash and reclamation deposit in demand deposits that are redeemable at any time without penalty, thereby reducing its exposure to interest rate fluctuations. Other interest rate risks arising from the Company s operations are not considered material. (v) Price risk The Company is exposed to price risk with respect to commodity and equity prices. The ability of the Company to explore its mineral properties and future profitability of the Company are directly related to the market price of gold and other precious metals. The Company monitors its marketable securities stock market movements and commodity prices to determine appropriate actions to be undertaken. (vi) Fair value hierarchy The Company classifies its fair value measurements in accordance with the three-level fair value hierarchy as follows: 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 that are not based on observable market data. The fair values of cash and marketable securities are measured based on level 1 inputs of the fair value hierarchy. 13. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS Significant non-cash transactions for the period ended May 31, 2014 consisted of: a) The issuance of 50,000 shares valued at $1,750 (see note 6) as part of the consideration for the Cuatro de Mayo project located in Mexico. b) Included in deferred exploration costs is $12,084 which relates to accounts payable and accrued liabilities.

23 13. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (cont d ) Significant non-cash transactions for the period ended May 31, 2013 consisted of: a) In reference to the Option Agreement for La Buena Property (Note 6), the Company received from Patriot Minefinders 400,000 shares valued at $83,774. The value of the shares was allocated to the recovery of costs La Buena. b) Included in deferred exploration costs is $31,216 which relates to accounts payable and accrued liabilities. 14. SEGMENTED INFORMATION The Company currently conducts substantially all of its operations in Canada and Mexico in one business segment being the exploration and development of resource properties. Geographical information is as follows: May 31, 2014 Mineral Properties Equipment Canada $ 1 $ 12,062 Mexico 1,581,359 7,520 $ 1,581,360 $ 19,582 November 30, 2013 Mineral Properties Equipment Canada $ 1 $ 16,987 Mexico 3,464,287 11,380 $ 3,464,288 $ 28, SUBSEQUENT EVENT On June 1, 2014, the Company announced it has elected to discontinue its interest in the Tecomate project in Sinaloa State, Mexico (Note 6).