Boundary Gold and Copper Mining Ltd. — Audit Report / Information 2021

Dec 29, 2021

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BOUNDARY GOLD AND COPPER MINING LTD.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

(Expressed in Canadian dollars)

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INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Boundary Gold and Copper Mining Ltd.:

Opinion

We have audited the financial statements of Boundary Gold and Copper Mining Ltd. (the “Company”), which comprise the consolidated statements of financial position as at August 31, 2021 and 2020, and the consolidated statements of comprehensive loss, cash flows and changes in shareholders’ equity for the years then ended, and notes to the financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at August 31, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 to the financial statements, which describes matters and conditions that indicate the existence of a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information comprises the information included in Management’s Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management’s Discusison and Analysis prior to the date of this auditor’s report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor's report is Barry Hartley.

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DALE MATHESON CARR-HILTON LABONTE LLP CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, BC

December 29, 2021

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BOUNDARY GOLD AND COPPER MINING LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian dollars)

AS AT AUGUST 31,

	2021 2020
ASSETS Current assets Cash Marketable securities (Note 3) Prepaid expenses and advances Non-current assets Reclamation bonds (Note 6) Exploration and evaluation assets (Note 6) TOTAL ASSETS	$ 134,119 $ 17,663 775,201 - 5,851 9,853
	915,171 27,516 79,700 174,700 645,957 3,316,932
	$ 1,640,828 $ 3,519,148
LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable (Note 18) Accrued liabilities Accounts payable to related parties (Note 9) Loans payable (Note 4) Lease liability - current portion (Note 5) Non-current liability Lease liability - non-current portion (Note 5) Shareholders’ equity Share capital (Note 11) Share-based payment reserve (Note 11) Deficit TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 811,633 $ 1,183,014 25,000 25,000 79,000 56,429 15,000 388,602 12,567 12,209
	943,200 1,665,254 4,271 16,837
	947,471 1,682,091 64,900,082 64,899,682 5,355,200 5,355,200 (69,561,925) (68,417,825)
	693,357 1,837,057
	$ 1,640,828 $ 3,519,148

Nature and continuance of operations (Note 1) Subsequent event (Note 19)

Approved and authorized by the Board on December 29, 2021:

Russell Vanskiver Director David Jenkins Director

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

BOUNDARY GOLD AND COPPER MINING LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Expressed in Canadian dollars)

FOR THE YEARS ENDED AUGUST 31,

	2021 2020
GENERAL AND ADMINISTRATIVE EXPENSES Accounting and audit Administration Business development recovery Consulting fees Depreciation (Notes 5 and 8) Interest and bank charges (Notes 4 and 5) Investor relations Legal Management and directors’ fees (Note 9) Office and miscellaneous Rent Shareholder communications Transfer agent and regulatory fees Travel and related costs Foreign exchange gain Gain on debt settlement (Note 10) Interest income Broker fees (Note 3) Unrealized loss on marketable securities (Note 3) Realized loss on marketable securities (Note 3) Gain on sale of subsidiary (Note 7) Loan administration fee (Note 4) Write-off of marketable securities (Note 3) Write-off of receivables Write-off of equipment (Note 8) Net loss and comprehensive loss for theyear	$ 28,105 $ 38,065 - 15,000 - (15,000) 571,161 60,000 - 26,092 28,937 32,107 550 21,736 20,051 68,530 84,000 429,647 11,903 21,695 45,000 51,500 6,740 2,046 18,545 49,691 12,717 10,481
	(827,709) (811,590)
	- 2,665 43,837 - - 165 (2,570) - (1,398,411) - (69,578) - 1,170,331 - (60,000) - - (14,421) - (397,131) - (50,198)
	(316,391) (458,920)
	$ (1,144,100) $ (1,270,510)
Basic and diluted lossper common share(Note 12)	$ (0.04) $ (0.04)
Weighted average number of common shares outstanding (Note 12)	31,559,003 31,548,834

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

BOUNDARY GOLD AND COPPER MINING LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian dollars)

FOR THE YEARS ENDED AUGUST 31,

	2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the year Items not affecting cash: Accrued interest Depreciation Derecognition of right-of-use of asset Gain on debt settlement Unrealized loss on marketable securities Loss on sale of West shares, including broker fees Gain on sale of subsidiary Write-off of marketable securities Write-off of receivables Write-off of equipment Changes in non-cash working capital items: Decrease in prepaid expenses and deposits Increase (decrease) in accounts payable and accrued liabilities Increase in accounts payable to related parties Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Exploration and evaluation expenditures Refund of reclamation bond Proceeds from sale of marketable securities Net cash received from sale of subsidiary Net cash provided by (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Payment of lease liability Proceeds from loan Repayment of loan Net cash provided by (used in) financing activities Net change in cash during the year Cash, beginning of year Cash, end ofyear	$ (1,144,100) $ (1,270,510) 681 29,631 - 26,092 - 49,147 (43,837) - 1,398,411 - 72,148 - (1,170,331) - - 14,421 - 397,131 - 50,198 4,002 56,045 (313,966) 518,414 22,571 27,089
	(1,174,421) (102,342) (30,000) (281,632) 95,000 - 487,574 - 1,124,794 -
	1,677,368 (281,632) (12,889) (12,889) 55,000 360,000 (428,602) -
	(386,491) 347,111
	116,456 (36,863) 17,663 54,526
	$ 134,119 $ 17,663

Supplemental disclosure with respect to cash flows (Note 15)

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

BOUNDARY GOLD AND COPPER MINING LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Expressed in Canadian dollars)

FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

					Total
	Number of	Share	Share Based		Shareholders’
	Shares	Capital	Payment Reserve	Deficit	Equity
Balance, August 31, 2019	31,547,112	$ 64,899,382	$ 5,355,200	$ (67,147,315)	$ 3,107,267
Shares issued to acquire property (Notes 6 and 11)	10,000	300	-	-	300
Loss and comprehensive loss for theyear	-	-	-	(1,270,510)	(1,270,510)
Balance, August 31, 2020	31,557,112	64,899,682	5,355,200	(68,417,825)	1,837,057
Shares issued to acquire property (Notes 6 and 11)	10,000	400	-	-	400
Loss and comprehensive loss for theyear	-	-	-	(1,144,100)	(1,144,100)
Balance, August 31, 2021	31,567,112	$ 64,900,082	$ 5,355,200	$(69,561,925)	$ 693,357

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

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

1. NATURE AND CONTINUANCE OF OPERATIONS

Boundary Gold and Copper Mining Ltd. (the “Company”) was incorporated under the Business Corporations Act (Alberta) on August 16, 1996. The Company is a resource exploration company focused on acquiring and exploring resource properties. The Company’s shares are listed on the TSX Venture Exchange. The Company’s head office and registered and records office address is Suite 400 – 837 West Hastings Street, Vancouver, British Columbia, V6C 3N6.

These consolidated financial statements are prepared 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 in the foreseeable future. The Company had a net loss of $1,144,100 for the year ended August 31, 2021. At August 31, 2021, the Company had a working capital deficit of $28,029, had not yet achieved profitable operations and has an accumulated deficit of $69,561,925 since its inception. The Company expects to incur further losses in the development of its business, all of which cast significant doubt on the Company’s ability to continue as a going concern. The Company will require additional financing in order to meet its ongoing levels of corporate overhead and discharge its liabilities as they come due. While the Company has been successful in securing financings in the past, there is no assurance that it will be able to do so in the future. Accordingly, these consolidated financial statements do not give effect to adjustments, if any, that would be necessary should the Company be unable to continue as a going concern. If the going concern assumption was not used, then the adjustments required to report the Company’s assets and liabilities on a liquidation basis could be material to these consolidated financial statements.

In March 2020, there was a global outbreak of COVID-19 (Coronavirus), which has had a significant impact on businesses through the restrictions put in place Canadian, provincial and municipal governments regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown the extent of the impact the COVID19 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 by Canada and other countries to fight the virus. While the extent of the impact is unknown, the Company anticipates this outbreak might increase the difficulty in capital raising which may negatively impact the Company’s business and financial condition.

2. BASIS OF PREPARATION

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations. The consolidated financial statements have been prepared under the historical cost convention.

The consolidated financial statements were authorized for issue by the Board of Directors on December 29, 2021.

Basis of consolidation

The consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments classified at fair value through profit or loss which are stated at their fair value. In addition, these financial statements have been prepared using the accrual basis of accounting.

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

2. BASIS OF PREPARATION (cont’d…)

Basis of consolidation (cont’d…)

These consolidated financial statements include the accounts of the Company and its subsidiaries. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All inter-company balances, transactions, income and expenses have been eliminated upon consolidation.

Subsidiaries

Subsidiaries are entities controlled by the Company. Control exists when the Company possesses power over an investee, has exposure to variable returns from the investee and has the ability to use its power over the investee to affect its returns. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by the Company.

The principal subsidiary of the Company as of August 31, 2021 is as follows:

			Ownership	Ownership
			Interest	Interest
		Place of	August 31,	August 31,
Name of subsidiary	Principal activity	Incorporation	2021	2020
Scion Mines S.A. de C.V. (“Scion”)	Mineral exploration	Mexico	100%	100%

Foreign currency translation

The presentation currency of the financial statements is the Canadian dollar. The functional currency is the currency of the primary economic environment in which the entity operates and has been determined for each entity within the group. The Company considers the functional currency for itself and its subsidiary to be the Canadian dollar. The functional currency determinations were conducted through an analysis of the consideration factors identified in International Accounting Standard (“IAS”) 21, the Effects of Changes in Foreign Exchange Rates .

Transactions in currencies other than the Canadian dollar are recorded at exchange rates prevailing on the date of transaction. At the end of each reporting period, the monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the rate of exchange at the statement of financial position date, while non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at the exchange rates approximating those in effect on the date of the transactions. Exchange gains and losses arising on translation of foreign operations with functional currencies different from the presentation currency are included in the statement of comprehensive loss.

The assets and liabilities of the Company’s subsidiaries which have functional currencies different from the presentation currency of the Company are translated to the presentation currency at the rate of exchange in effect at the financial reporting period end; revenue and expenses are translated at average exchange rates. All resulting exchange gains or losses are included in the statement of comprehensive loss.

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

2. BASIS OF PREPARATION (cont’d…)

Financial instruments

The Company classifies its financial instruments in the following categories: at fair value through profit or loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.

The following table shows the classification of financial instruments under IFRS 9:

Financial assets/liabilities	IFRS 9 Classification
Cash	FVTPL
Marketable securities	FVTPL
Accounts payable	Amortized cost
Accounts payable to related parties	Amortized cost
Loanspayable	Amortized cost

Measurement

Financial assets at FVTOCI

Elected investments in equity investments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses recognized in other comprehensive loss.

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transactions costs expensed in the consolidated statements of net loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are recorded in the consolidated statements of net loss in the period in which they arise.

Impairment of financial assets at amortized cost

The Company recognized a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset’s credit risk has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the consolidated statements of net loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

2. BASIS OF PREPARATION (cont’d…)

Financial instruments (cont’d…)

Derecognition

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the consolidated statements of comprehensive net loss. However, gains and losses on derecognition of financial assets classified as FVTOCI remain within accumulated other comprehensive loss.

Financial liabilities

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. Generally, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in the consolidated statements of comprehensive net loss.

Revenue from contracts with customers

The revenue standard applies a single principles-based, five-step model for the recognition of revenue when control of goods is transferred to, or a service is performed for, the customer. IFRS 15 also requires enhanced disclosures about revenue to help users better understand the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers.

Assets held for sale

Judgement is required in determining whether an asset meets the criteria for classification as “assets held for sale” in the consolidated statements of financial position. Criteria considered by management include the existence of and commitment to a plan to dispose of the assets, the expected selling price of the assets, the expected timeframe of the completion of the anticipated sale and the period of time any amounts have been classified within assets held for sale. The Company reviews the criteria for assets held for sale each quarter and reclassifies such assets to or from this financial position category as appropriate. In addition, there is a requirement to periodically evaluate and record assets held for sale at the lower of their carrying value and fair value less costs to sell.

Leases

At inception of a contract, the Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control an identified asset for a period of time in exchange for consideration.

Leases of right-of-use assets are recognized at the lease commencement date at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined, and otherwise at the Company’s incremental borrowing rate. At the commencement date, a right-of-use asset is measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received.

Each lease payment is allocated between repayment of the lease principal and interest. Interest on the lease liability in each period during the lease term is allocated to produce a constant periodic rate of interest on the remaining balance of the lease liability. Except where the costs are included in the carrying amount of another asset, the Company

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

2. BASIS OF PREPARATION (cont’d…)

Leases (cont’d…)

recognizes in profit or loss (a) the interest on a lease liability and (b) variable lease payments not included in the measurement of a lease liability in the period in which the event or condition that triggers those payments occurs. The Company subsequently measures a right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses; and adjusted for any remeasurement of the lease liability. Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term, except where the lease contains a bargain purchase option a right-of-use asset is depreciated over the asset’s useful life.

Cash

Cash is comprised of cash on hand and demand deposits.

Equipment

Equipment is recorded at historical cost less accumulated depreciation and impairment charges. Equipment is depreciated at the following annual rates, approximating their estimated useful lives in years, commencing when the related assets are available for use:

Computer equipment	30% declining balance method
Mobile trailers	30% declining balance method
Office furniture and equipment	20% declining balance method
Vehicles	5 years straight line

The Company’s equipment is reviewed for an indication of impairment at the end of each reporting period. If an indication of impairment exists, the asset’s recoverable amount is estimated. Impairment losses are recognized in profit or loss.

An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized.

Exploration and evaluation assets

Pre-exploration costs are expensed in the period in which they are incurred. All costs related to the acquisition, and exploration of mineral properties are capitalized by property until the commencement of commercial production. Properties that have close proximity and have the possibility of being developed as a single mine are grouped as projects and are considered separate cash generating units (“CGU”) for the purpose of determining future mineral reserves and impairments.

Management reviews the capitalized costs on its exploration and evaluation assets at least annually to consider if there is an impairment value to take into consideration from current exploration results and management’s assessment of the future probability of profitable operations from the property, or likely gains from the disposition or option of the property. If a property is abandoned, or considered to have no future economic potential, the acquisition and accumulated exploration and evaluation costs are written off to profit or loss. If the carrying value of a project exceeds its estimated value, an impairment provision is recorded.

Once the technical feasibility and commercial viability of extracting the mineral resource has been determined, the mineral property is considered to be a mine under development and is classified as “Mining Assets”. Exploration and evaluation expenditures accumulated are also tested for impairment before the property costs are transferred to mining assets.

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

2. BASIS OF PREPARATION (cont’d…)

Impairment of long-lived assets

At each reporting date, the Company reviews the carrying amounts of its assets to determine whether there are any indicators of impairment. If any such indicator exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any.

Where the asset does not generate cash inflows that are independent from other assets, the Company estimates the recoverable amount of the CGU to which the asset belongs. The recoverable amount is determined as the higher of fair value less direct costs to sell and the asset or CGU’s value in use. In assessing value in use, the estimated future cash flows are discounted to their present value. Estimated future cash flows are calculated using estimated recoverable reserves, estimated future commodity prices and the expected future operating and capital costs. The pre-tax discount rate applied to the estimated future cash flows reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted. Determining the discount rate includes appropriate adjustments for the risk profile of the country in which the individual asset or CGU operates.

If the carrying amount of an asset or CGU exceeds its recoverable amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized in the statement of comprehensive loss.

Assets that have been impaired are tested for possible reversal of the impairment whenever events or changes in circumstance indicate that the impairment may have reversed. Where an impairment subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but only so that the increased carrying amount does not exceed the carrying amount that would have been determined (net of amortization or depletion) had no impairment loss been recognized for the asset or CGU in prior periods. A reversal of impairment is recognized as a gain in the statement of comprehensive income (loss).

Provision for environmental rehabilitation

The Company recognizes the liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of tangible long-lived assets in the period when the liability arises. The net present value of future rehabilitation costs is capitalized to the long-lived asset to which it relates with a corresponding increase in the rehabilitation provision in the period incurred. Discount rates using a pre-tax rate that reflects the time value of money are used to calculate the net present value. The Company’s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to the related assets with a corresponding entry to the rehabilitation provision. The increase in the provision due to the passage of time is recognized as interest expense.

The Company has no known restoration, rehabilitation or environmental costs related to its exploration and evaluation assets as at August 31, 2021.

Share-based payments

The Company grants stock options to directors, officers, employees and consultants. An individual is classified as an employee when the individual is an employee for legal or tax purposes, or provides services similar to those performed by an employee.

The fair value of stock options granted is recorded using the graded attribution method. The fair value of stock options, as adjusted for the expected level of vesting, is measured on the date of grant, using the Black-Scholes option pricing model, and is recognized over the vesting period. Consideration paid for the shares on the exercise of stock options is credited to share capital.

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

2. BASIS OF PREPARATION (cont’d…)

Share-based payments (cont’d…)

In situations where equity instruments are issued to non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of goods or services received.

Warrants issued in equity financing transactions

The Company engages in equity financing transactions to obtain the funds necessary to continue operations and explore and evaluate exploration and evaluation assets. These equity financing transactions may involve issuance of common shares or units. A unit comprises a certain number of common shares and a certain number of share purchase warrants (“Warrants”). Depending on the terms and conditions of each equity financing agreement (“Agreement”), the Warrants are exercisable into additional common shares prior to expiry at a price stipulated by the Agreement. Warrants that are part of units are assigned value based on the residual value method and included in share capital with the common shares that were concurrently issued. Warrants that are issued as payment for agency fees or other transactions costs are accounted for as share-based payments.

Flow-through common shares

The Company will from time to time, issue flow-through common shares to finance a portion of its exploration program. Pursuant to the terms of the flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates the flow-through share into (i) a flow-through share premium, equal to the estimated premium, if any, investors pay for the flow-through feature, which is recognized as a liability and (ii) share capital. Upon expenses being incurred, the Company derecognizes the liability and recognizes a deferred tax liability for the amount of tax reduction renounced to the shareholders. The premium is recognized as other income and the related deferred tax recognized as a tax provision.

Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian resource property exploration expenditures within a two-year period. The portion of the proceeds received but not yet expended at the end of the Company’s period is disclosed separately as flow-through share proceeds.

The Company may also be subjected to a Part XII.6 tax on flow-through proceeds renounced under the Look-back Rule, in accordance with Government of Canada flow-through regulations. When applicable, this tax is accrued as a financial expense until paid.

Income taxes

Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is recognized in respect of temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences do not result in deferred tax assets or liabilities: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting or taxable loss; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the date of the statement of financial position.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

2. BASIS OF PREPARATION (cont’d…)

Income taxes (cont’d…)

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Loss per share

The dilutive effect on loss per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the year. For the periods presented, diluted loss per share is not presented separately from loss per share as the conversion of outstanding stock options and warrants into common shares would be antidilutive. Basic loss per common share is calculated using the weighted-average number of shares outstanding during the year.

Critical judgments and sources of estimation uncertainty

The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. These financial statements include estimates which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical Judgments

The following are critical judgments that management has made in the process of applying accounting policies and that have the most significant effect on the amounts recognized in the financial statements:

• (i) The determination of categories of financial assets and financial liabilities has been identified as an accounting policy which involves judgments or assessments made by management.

• (ii) Management is required to assess the functional currency of each entity of the Company. In concluding that the Canadian dollar is the functional currency of the parent and its subsidiary, management considered the currency that mainly influences the cost of providing goods and services in each jurisdiction in which the Company operates. It was determined that the Canadian dollar is the functional currency of the Company and its subsidiary.

• (iii) Management is required to assess impairment in respect of exploration and evaluation assets. The triggering events are defined in IFRS 6. In making the assessment, management is required to make judgments on the status of each project and the future plans towards finding commercial reserves. The nature of exploration and evaluation activity is such that only a proportion of projects are ultimately successful, and some assets are likely to become impaired in future periods.

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

2. BASIS OF PREPARATION (cont’d…)

Critical judgments and sources of estimation uncertainty (cont’d…)

Critical Judgments (cont’d…)

• (iv) The determination of whether a set of assets acquired, and liabilities assumed constitute a business may require the Company to make certain judgments, taking into account all facts and circumstances. A business is presumed to be an integrated set of activities and assets capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or economic benefits.

Estimation Uncertainty

The following are key assumptions concerning the future and other key sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial year:

• (i) Provisions for income taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final outcome of these tax-related matters is different from the amounts that were originally recorded, such differences will affect the tax provisions in the period in which such determination is made.

• (ii) The assessment of any impairment of evaluation and exploration assets, and property and equipment is dependent upon estimates of the recoverable amount that take into account factors such as reserves, economic and market conditions and the useful lives of assets.

• (iii) The Company uses the Black-Scholes Option Pricing Model for valuation of share-based payments. Option pricing models require the input of the subjective assumptions including expected price volatility, interest rate and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s net loss and share-based payment reserve.

3. MARKETABLE SECURITIES

As at August 31, 2020, marketable securities consist of Nil common shares (2019 - 542,343) of NexGen Mining Incorporated (“NexGen”), formerly Brilliant Sands Incorporated. NexGen is a related party by virtue of a common director with the Company. During the year ended August 31, 2020, the Company wrote-off the marketable securities relating to NexGen in the amount of $14,421.

As at August 31, 2021, marketable securities consist of 5,555,556 common shares (2020 - Nil) of West Mining Corp. ("West”) relating to the sale of 199 (Note 7). The fair value of the 7,361,112 West shares was $2,733,334 when received, estimated using a commonly used option model that estimates the discount related to the lack of marketability of the shares from the contractual restriction. During the year ended August 31, 2021, the Company sold 1,805,556 shares for proceeds of $487,574, realized a loss of $69,578 and paid broker fees of $2,570. The outstanding West shares held were revalued to $775,201 at August 31, 2021 and the Company recorded an unrealized loss of $1,398,411 in the statement of loss and comprehensive loss during the year ended August 31, 2021.

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

3. MARKETABLE SECURITIES (cont’d…)

The continuity of the Company’s marketable securities is as follows:

	NexGen Mining Inc. West Mining Corp. Total
	Number of Shares Fair Value Number of Shares Fair Value Number of Shares Fair Value
Balance, August 31, 2019 Write-off	542,343 $ 14,421 - $ - 542,343 $ 14,421 (542,343) (14,421) - - (542,343) (14,421)
Balance, August 31, 2020 Additions Sale of shares Change in market value	- - - - - - - - 7,361,112 2,733,334 7,361,112 2,733,334 - - (1,805,556) (559,722) (1,805,556) (559,722) - - - (1,398,411) - (1,398,411)
Balance, August 31, 2021	- $ - 5,555,556 $ 775,201 5,555,556 $ 775,201

4. LOANS PAYABLE

On September 18, 2019, the Company entered into two separate loan agreements with third parties for $150,000 each for an aggregate of $300,000. Both loans bear interest at 10% per annum. The principal amount and any accrued interest are due in one year and are secured with general security agreement against the Kena-Daylight property. During the year ended August 31, 2021, the Company recorded accrued interest of $26,713 (2020 - $28,602) on the loans. During the year ended August 31, 2021, the Company paid in full both loans including interests. As of August 31, 2021, the loan payable had a balance of $Nil (2020 - $328,602). The Company also paid a total of $50,000 administration fees for both loans during the year ended August 31, 2021.

During the year ended August 31, 2020, the Company received loans of $60,000 from third parties. The loan is unsecured, non-interest bearing and has no specific terms of repayment. As of August 31, 2021, the loan had a balance of $10,000.

During the year ended August 31, 2021, the Company received loans of $55,000 from third parties. The loans are unsecured, non-interest bearing and has no specific terms of repayment. As of August 31, 2021, the loan had a balance of $5,000. The Company paid $10,000 administration fees during the year ended August 31, 2021.

5. LEASE ASSETS AND LIABILITIES

During the year ended August 31, 2019, the Company entered a lease agreement for use of vehicle for a monthly lease payment of $1,074 over a period of four years. The Company recognized the value of right-of-use (“ROU”) asset and lease liability on the statement of financial position.

Right-of-use asset

Balance, August 31, 2019	$	58,057
Depreciation		(8,910)
Derecognition		(49,147)
Balance, August 31, 2020 and 2021	$	-

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

5. LEASE ASSETS AND LIABILITIES (cont’d…)

Right-of-use asset (cont’d…)

During the year ended August 31, 2020, the Company signed a severance agreement with a former executive, which included the former executive taking possession of the above-mentioned vehicle and the Company continuing to pay the monthly payments. Accordingly, the Company derecognized the ROU asset (Note 8).

Lease liability

Balance, August 31, 2019	$	40,906
Accrued interest		1,029
Cash payment		(12,889)
Balance, August 31, 2020		29,046
Accrued interest		681
Cash payment		(12,889)
Balance, August 31, 2021		16,838
Less: Current portion		(12,567)
Non-currentportion	$	4,271

6. EXPLORATION AND EVALUATION ASSETS

The Kena-Daylight and the Toughnut Property combined forms a single area of exploration for the Company.

Kena - Daylight Project

On April 11, 2017, the Company completed its acquisition of 1994854 Alberta Ltd. (“199”), a wholly owned subsidiary of the Company. 199 entered into an option agreement with Apex Resources Inc. (“Apex”), as amended on June 26, 2019, pursuant to which it has an option (the “Option”) to earn an 80% interest in Apex's Kena and Daylight properties located in the Nelson area of British Columbia, Canada. The Option has a term of 4 years commencing from October 3, 2016 (the "Effective Date"). The obligations and rights of 199 under the Option have been assigned to the Company. To exercise the Option and earn its 80% interest in the Kena Project, the Company will:

• i. Make the following cash option payments to Apex:

• a. $500,000 within 5 business days from the Effective Date (paid by 199 prior to the Acquisition);

• b. an additional $250,000 within twelve months from the Effective Date (paid October 4, 2017);

• c. an additional $250,000 within twenty-four months from the Effective Date (paid September 28, 2018); and

• d. an additional $250,000 within thirty-five months from the Effective Date (paid September 27, 2019).

for total cash option payments of $1,250,000. Under the Option Agreement, a final cash payment of $250,000 was to be made within thirty-six months from the Effective Date. Pursuant to the Amending Agreement, the final cash payment of $250,000 is to be paid one month earlier, within thirty-five months from the Effective Date;

• ii. issue common shares to Apex as follows:

• a. 75,000 shares within 5 business days from the Effective Date (issued by 199 prior to the Acquisition);

• b. an additional 75,000 shares within twelve months from the Effective Date (issued with a value of $106,876);

• c. an additional 75,000 shares within twenty-four months from the Effective Date (issued with a value of $39,375); and

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

6. EXPLORATION AND EVALUATION ASSETS (cont’d…)

Kena - Daylight Project (cont’d…)

• d. an additional 75,000 shares anytime before July 31, 2019 (issued with a value of $7,500).

for a total of 300,000 shares. Under the Option Agreement, the Company had an obligation to issue a final allocation of 75,000 shares to Apex within thirty-six months from the Effective Date. Pursuant to the Amending Agreement, the Company is required to issue the 75,000 shares anytime before July 31, 2019 (issued July 5, 2019); and

• iii. incur exploration expenditures on the Kena Project as follows:

• a. $100,000, within twelve months from the Effective Date (completed);

• b. an additional $400,000 within twenty-four months from the Effective Date (completed);

• c. an additional $1,000,000 within sixty months from the Effective Date; and

• d. an additional $1,500,000 within seventy-two months from the Effective Date.

for total exploration expenditures of $3,000,000. Pursuant to the Amending Agreement item 1(c) above has been extended by two years to sixty months from the Effective Date and item 1(d) above has been extended by two years to seventy-two months from the Effective Date.

All other provisions of the Option Agreement remain unamended.

After earning its 80% interest in the Kena-Daylight Project, the Company has a second option to earn and acquire up to an additional 20% undivided interest in the Kena-Daylight Project by making a $2,000,000 cash payment to Apex and granting a 1% net smelter returns royalty (the “NSR”) on the Kena-Daylight Project to Apex on or before the date that is 180 days following the date of exercise of the 80% option. 199 has the right to purchase one half of the 1% NSR for a purchase price of $5,000,000 on or before the date in which commercial production commences. If the 20% option is not exercised, 199 and Apex will establish an 80:20 joint venture for the further management, exploration and development of the Kena-Daylight Project.

On December 24, 2020 (“execution date”), the Company entered into an option agreement respecting the Kena and Daylight Gold-Copper Properties (the “Property”) with 199 and West, pursuant to which West has the option to earn a 100% undivided right, title and interest in and to the Property. On January 25, 2021, the parties amended and restated the option agreement. The economic terms of the amended and restated agreement are the same as previously, with the difference being that the agreement is now structured as an option to acquire the shares of the registered owner of the properties, 199, a wholly owned subsidiary of the Company, rather than as an option for West to acquire the Property from 199. As such, West has the right to acquire all of the issued and outstanding shares of 199 from the Company.

In order to exercise the option and acquire an undivided 100% interest in 199, West shall:

• a. on the execution date, issue 1,805,556 common shares (received) to the Company and pay an aggregate of $325,000 in cash to the Company, less the $25,000 previously paid to the Company as a deposit (received);

• b. on or before June 24, 2021, issue 1,805,556 common shares to the Company and pay an aggregate of $325,000 to the Company;

• c. on or before December 24, 2021, issue 1,805,556 common shares to the Company and pay an aggregate of $325,000 (received) in cash to the Company;

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

6. EXPLORATION AND EVALUATION ASSETS (cont’d…)

Kena - Daylight Project (cont’d…)

• d. on or before June 24, 2022, issue 1,944,444 common shares to the Company and pay an aggregate of $350,000 in cash to the Company;

• e. on or before October 3, 2021, spend a cumulative minimum amount of $711,000 on exploration expenditures on the Property; and

• f. on or before October 3, 2022, spend a cumulative minimum amount of $2,211,000 on exploration expenditures on the Property.

The exploration expenditures to be made by West under the share option agreement will fulfill 199’s obligations to earn an 80% interest in the Property.

Any interest that 199 earns in the Property will be subject to the following third party NSR royalties on certain claims comprising the Property: (a) Daylight Crown Grants – 3% NSR on gold and silver and 1.5% NSR on all other metals (subject to the right to purchase 66 2/3% of the NSR for $1,000,000 upon or prior to commencement of commercial production and the issuance of 200,000 shares upon completion of a positive feasibility study); (b) Great Western Claim Group – 3% NSR on gold and silver and 1.5% NSR on all other metals (subject to the right to purchase 66 2/3% of the NSR for $1,000,000 upon commencement of commercial production and the issuance of 20,000 shares upon completion of a positive feasibility study); (c) Starlight Crown Grants – 1% NSR (subject to the right to purchase the NSR for $1,000,000 upon commencement of commercial production); (d) Tough Nut Claims - 3% NSR on gold and silver and 1.5% NSR on all other metals (subject to the right to purchase 66% of the NSR for $2,000,000 upon commencement of production); and (e) Kena Claims - 3% NSR on gold and silver and 1.5% NSR on all other metals (subject to the right to purchase 50% of the NSR for the greater of 7,000 ounces gold or $2,000,000).

On April 6, 2021, the Company signed a second amending agreement with respect to above share option agreement, which amends the share option agreement dated January 25, 2021, between the parties. The amending agreement provides that West can complete its acquisition of all 199’s shares from the Company by making a cash payment of $800,000 (received) to the Company within five days and by issuing an aggregate of 7,361,112 shares to the Company as follows:

• a. 1,805,556 shares already issued to the Company will be free-trading on April 24, 2021 (received); b. 1,805,556 shares will be subject to voluntary escrow until October 24, 2021 (received); c. 1,805,556 shares will be subject to voluntary escrow until April 24, 2022 (received); and d. 1,944,444 shares will be subject to voluntary escrow until October 24, 2022 (received).

The transaction was completed during the year ended August 31, 2021 (Notes 3 and 7).

Toughnut Property

As of July 4, 2017, the Company entered into an option agreement to acquire a 100% interest in the Toughnut Property, located in southeastern British Columbia. To acquire the Toughnut property, the Company must pay $150,000, issue 50,000 common shares and incur $750,000 of exploration expenditures over a five-year period. The requirements of the option agreement are as follows:

• a. Pay $30,000 cash (paid) and issue 10,000 common shares on or before five business days following the effective date (June 30, 2017) (issued);

• b. Pay $30,000 cash (paid) and issue 10,000 common shares on or before June 30, 2018 (issued with a value of $8,000);

• c. Pay $30,000 cash (paid) and issue 10,000 common shares on or before June 30, 2019 (issued with a value of $1,000);

• d. Pay $30,000 cash (paid) and issue 10,000 common shares on or before June 30, 2020 (issued with a value of $300) (Note 11);

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

6. EXPLORATION AND EVALUATION ASSETS (cont’d…)

Toughnut Property (cont’d…)

• e. Pay $30,000 cash (paid) and issue 10,000 common shares on or before June 30, 2021 (issued with a value of $400) (Note 11) ; and

• f. Incur $750,000 in exploration expenditures on or before June 30, 2022 (completed). As of August 31, 2021, the Company has incurred exploration expenditures of $1,474,654.

The Toughnut property will be subject to a 2% NSR on its acquisition by the Company. The Company shall have the right to purchase one-half of the 2% NSR for the purchase price of $2,000,000 on or before the date on which commercial production commences. The property is also subject to a 0.5% NSR from the production of metals until the $1,000,000 cap has been attained on the underlying royalty to the original sellers of the property.

During the year ended August 31, 2021, the Company completed the share option agreement relating to the acquisition of Toughnut property.

As at August 31, 2019, the Company estimated the fair value of the Kena-Daylight-Toughnut project to be $3,035,000, resulting in an impairment charge of $9,940,704.

As of August 31, 2021, the Company has reclamation bond deposit of $79,700 (2020 - $174,700) related to potential environmental rehabilitation work for the Kena-Daylight-Toughnut project.

The continuity of the Company’s exploration and evaluation assets is as follows:

	Kena-Daylight-
	Toughnut
Acquisition Costs
Balance, beginning at August 31, 2020	$ 10,883,892
Incurred	30,400
Balance,endingat August 31,2021	10,914,292
Deferred Exploration Costs
Balance, at August 31, 2020 and 2021	2,373,744
Impairment	(9,940,704)
Sale of Kena-Daylight Property (Note 7)	(2,701,375)
Total exploration and evaluation assets	$ 645,957
	Kena-Daylight-
	Toughnut
Acquisition Costs
Balance, beginning at August 31, 2019	$ 10,603,592
Incurred	280,300
Balance,endingat August 31,2020	10,883,892
Deferred Exploration Costs
Balance, beginning	2,372,112
Project preparation and support	489
Report and data compilation	1,750
Miscellaneous	(607)
Balance, ending at August 31, 2020	2,373,744
Impairment	(9,940,704)
Total exploration and evaluation assets	$ 3,316,932

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

7. SALE OF 199

During the year ended August 31, 2021, the Company commenced plans to sell certain properties, and on April 6, 2021, the Company entered into a second amending option agreement with West and the Company’s wholly owned subsidiary, 199, respecting the Kena and Daylight gold-copper properties, which amends the share option agreement dated January 25, 2021, between the parties (Note 6). The amending agreement provides that in order to exercise the option and acquire an undivided 100% interest in 199, West shall:

• a) issue upon execution of the agreement, 1,805,556 common shares of West free of escrow on April 24, 2021 (received);

• b) issue upon execution of the agreement, 1,805,556 common shares of West free of escrow on October 24, 2021 (received);

• c) issue upon execution of the agreement, 1,805,556 common shares of West free of escrow on April 24, 2022 (received);

• d) issue upon execution of the agreement, 1,805,556 common shares of West free of escrow on October 24, 2022 (received); and

• e) one time payment of $800,000 due within 5 days of the execution of the agreement (received).

Pursuant to the amending agreement dated April 6, 2021, the Company completed the sale of 199 to West and recognized a gain on sale of subsidiary of $1,170,331 in the statement of loss and comprehensive loss. The gain on sale of subsidiary was computed as follows:

Consideration received
Fair value of common shares received (Note 3)	$ 2,733,334
Cash(Note 6)	1,125,000
	$ 3,858,334
Net assets sold
Exploration and evaluation assets (Note 6)	$ 2,701,375
Cash	206
Accountspayable	(13,578)
	$ 2,688,003
Gain on sale of subsidiary	$ 1,170,331

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

8. EQUIPMENT

		Computer		Office furniture				Mobile
		equipment		and equipment		Vehicle**		trailers*		Total
Cost
Balance at August 31, 2019	$	33,496	$	3,122	$	36,935	$	68,798	$	142,351
Write-off		-		(325)		(16,621)		(68,798)		(85,744)
Balance at August 31,2020 and 2021	$	33,496	$	2,797	$	20,314	$	-	$	56,607
Accumulated depreciation
Balance at August 31, 2019	$	33,496	$	2,560	$	14,774	$	22,922	$	73,752
Additions		-		237		5,540		12,624		18,401
Write-off		-		-		-		(35,546)		(35,546)
Balance at August 31,2020 and 2021	$	33,496	$	2,797	$	20,314	$	-	$	56,607
Carrying amounts
Balance,at August 31,2020	$	-	$	-	$	-	$	-	$	-
Balance,at August 31,2021	$	-	$	-	$	-	$	-	$	-

*In relation to the Company’s decision not to pursue the Manto Negro project, the Company wrote-off the mobile trailers which were used primarily for the project. The Company does not anticipate any further use of this equipment.

**As part of a settlement agreement with a former executive, a vehicle was transferred to the former executive and $1,219 was charged to management and director fees, resulting in a total write off of equipment charge of $50,198 during the year ended August 31, 2020 (Note 5).

9. RELATED PARTY TRANSACTIONS

During the year ended August 31, 2021, the Company carried out the following transactions with related parties:

• a. Transactions:

		August 31,	August 31,
		2021	2020
Management fees to an officer and director and companies
controlled by officers and directors	$	132,800 $	83,500
Management fee to a former director and officer*	$	- $	270,000

*Includes severance fee to a former director and officer.

• b. Key management compensation:

Key management includes the President and CEO and the CFO. The compensation paid or payable to key management or companies controlled by them for director and/or management services is shown below:

		August 31,	August 31,
		2021	2020
Fees reported as management fees to an officer and director and
companies controlled by officers and directors	$	132,800 $	83,500
Fees reported as management fee to a former director and officer*	$	- $	270,000
Directors’ fees	$	- $	27,000

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

9. RELATED PARTY TRANSACTIONS (cont’d…)

*Includes severance fee to a former director and officer.

• c. Accounts payable to related parties:

		August 31,	August 31,
		2021	2020
Fees to directors and officers of the Company	$	79,000 $	56,429

Amounts due to related parties are unsecured, non-interest bearing and have no specific terms of repayment.

10. DEBT SETTLEMENT AGREEMENTS

On September 3, 2020, the Company entered into a debt settlement agreement with Gowling WLG (Canada) LLP (“Gowling”) to settle a debt of $25,346 plus interest and penalties for $12,500 cash payment. The Company recognized a gain on debt settlement of $13,587 during the year ended August 31, 2021.

On May 26, 2021, the Company entered into a debt settlement agreement with David Schmidt, a former director, in connection with the previous claims by the Company for indemnication on the breach of fiduciary duties to the Company. Pursuant to the agreement, David Schmidt paid the Company a total sum of $1,000 as full and final settlement of all outstanding claims between the parties. The Company recognized a gain on debt settlement of $30,250 during the year ended August 31, 2021.

11. SHARE CAPITAL

Authorized shares

Unlimited number of voting common shares without par value. Unlimited number of preferred shares, issuable in series.

Issued and outstanding

Effective November 26, 2019, the Company consolidated its common shares on the basis of five (5) pre-consolidated share for one (1) post-consolidated share.

At August 31, 2021, the Company had 31,567,112 (2020 - 31,557,112) common shares and no preferred shares outstanding.

Year ended August 31, 2021

On June 23, 2021, the Company issued 10,000 common shares with a fair value of $400 pursuant to the terms of the option agreement in relation to the Toughnut Property (Note 6).

Year ended August 31, 2020

On June 29, 2020, the Company issued 10,000 common shares with a fair value of $300 pursuant to the terms of the option agreement in relation to the Toughnut Property (Note 6).

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

11. SHARE CAPITAL (cont’d…)

Share purchase warrants

Share purchase warrant transactions are summarized as follows:

	Number of	Weighted Average
	Warrants	ExercisePrice
Balance, August 31, 2019	278,790	$ 2.20
Expired	(278,790)	2.20
Balance,August 31,2020 and 2021	-	$-

As at August 31, 2021, the Company has Nil share purchase warrants outstanding.

Stock options

The Company has an incentive stock option plan in place under which it is authorized to grant options to executive officers and directors, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common shares of the Company. Under the plan, the exercise price of each option shall not be less than the market price permitted by any stock exchange on which the Company’s common shares are listed or any other regulatory body having jurisdiction. The options can be granted for a maximum term of 10 years and are subject to vesting provisions determined by the board of directors.

Stock option transactions are summarized as follows:

	Number	Weighted Average	Weighted Average
	ofOptions	ExercisePrice
Outstanding at August 31, 2019	1,680,000	$	0.40
Expired	(290,000)		1.08
Outstanding at August 31, 2020	1,390,000		0.28
Expired	(1,150,000)		0.29
Outstandingat August 31,2021	240,000	$	0.25
Options exercisable at August 31,2021	240,000	$	0.25

The following incentive stock options were outstanding to directors, officers and consultant at August 31, 2021:

Number of Options	Exercise Price		Number of Options
Outstanding	($)	Expiry Date	Exercisable
240,000	0.25	July15,2024	240,000

The weighted average life of the stock options are 2.87 years.

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

11. SHARE CAPITAL (cont’d…)

Share-based payment reserve

Share-based payment reserve comprised of share-based payments recognized from stock options granted and warrant reserve.

12. LOSS PER SHARE

The calculation of basic and diluted loss per share for the year ended August 31, 2021 was based on the loss attributable - to common shareholders of $1,144,100 (2020 $1,270,510) and a weighted average number of common shares outstanding of 31,559,003 (2020 - 31,548,834).

13. CAPITAL MANAGEMENT

The Company manages its capital to safeguard the Company’s ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits to other stakeholders, and to have sufficient funds on hand for business opportunities as they arise.

The Company considers the items included in 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 the underlying assets. In order to maintain or adjust the capital structure, the Company may issue new shares through short-term prospectuses, private placements, sell assets, incur debt, or return capital to shareholders. As at August 31, 2021, the Company is not subject to externally imposed capital requirements. There were no changes to the Company’s approach to capital management during the year.

14. SEGMENTED INFORMATION

The Company has one reportable operating segment, being the acquisition and exploration of exploration and evaluation assets. All of the Company’s non-current assets are located in Canada as follows:

		Canada
Balance at August 31, 2021
Mineral properties	$	645,957
Other non-current assets	$	79,700
Balance at August 31, 2020
Mineral properties	$	3,316,932
Other non-current assets	$	174,700

15. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

During the year ended August 31, 2021, the Company received 7,361,112 common shares as consideration pursuant to option agreement with West valued at $2,733,334 (Note 3).

During the year ended August 31, 2020, a balance of $75,819 included in exploration and evaluation assets relating to accounts payable and accrued liabilities.

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

16. FAIR VALUE MEASUREMENT AND RISK

The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:

Credit risk

Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash. The Company limits its exposure to credit loss by placing its cash with major financial institutions.

Liquidity risk

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities - when due. As at August 31, 2021, the Company had a cash balance of $134,119 (2020 $17,663) to settle current liabilities of $943,200 (2020 - $1,665,254). All of the Company’s financial liabilities have contractual maturities of 30 days or due on demand and are subject to normal trade terms.

The Company has historically relied on equity financings to satisfy its capital requirements and will continue to depend heavily upon equity capital to finance its activities. There can be no assurance the Company will be able to obtain the required financing in the future on acceptable terms. The ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing market conditions.

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity prices.

(a) Interest rate risk

The Company has cash balances and no variable interest-bearing debt and therefore is not exposed to risk in the event of fluctuations.

(b) Foreign currency risk

The Company is not exposed to significant foreign currency risk on fluctuations related to cash and accounts payable liabilities that are denominated in United States dollars (“US$”) and Mexican pesos (“MX$”). The Company does not use derivatives or other techniques to manage foreign currency risk.

(c) Price risk

The Company is exposed to price risk with respect to commodity and equity prices. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. Equity price risk is defined as the potential adverse impact on the Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. The Company closely monitors commodity prices, and the stock market to determine the appropriate course of action to be taken by the Company.

(d) Fair value

The carrying value of marketable securities, accounts payable, accounts payable to related parties and loans payable approximate fair value because of the short term nature of the instruments. The carrying value of the reclamation bond is the amortized cost.

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

16. FAIR VALUE MEASUREMENT AND RISK (cont’d…)

Market risk (cont’d…)

• (d) Fair value (cont’d…)

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 value of cash and marketable securities are based on level 1 inputs of the fair value hierarchy.

17. INCOME TAXES

A reconciliation of the combined Canadian federal and provincial income tax rate to the income tax recovery presented in the accompanying consolidated statements of comprehensive loss is provided below:

A reconciliation of income taxes at statutory rates with the reported taxes is as follows:

		2021		2020
Loss for the year	$	(1,144,100)	$	(1,270,510)
Tax rate		27%		27%
Expected income tax recovery		(308,907)		(343,000)
Adjustment to prior years provision versus statutory tax returns and
expiry of non-capital losses		145,000		917,000
Permanent differences		(10,000)		-
Change in unrecognizable deductible temporary differences		174,000		(574,000)
Total income tax recovery	$	-	$	-

The significant components of the Company’s deferred tax assets that have not been included on the consolidated statement of financial position as follows:

		2021		2020
Exploration and evaluation assets	$	1,487,000	$	1,632,000
Equipment		422,000		422,000
Share issue costs		34,000		85,000
Marketable securities		303,000		10,000
Other assets		1,257,000		1,257,000
Allowable capital losses		134,000		134,000
Non-capital losses available for future periods		4,351,000		4,274,000
		7,988,000		7,814,000
Unrecognizable deferred tax assets		(7,988,000)		(7,814,000)
Net deferred tax assets	$	-	$	-

BOUNDARY GOLD AND COPPER MINING LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian dollars) FOR THE YEARS ENDED AUGUST 31, 2021 AND 2020

17. INCOME TAXES (cont’d…)

No net deferred tax asset has been recognized in respect of the above for the years ended August 31, 2021 and 2020 because the amount of future taxable profit that will be available to realize such assets is not probable.

• The Company has non-capital losses for Canadian income tax purposes of approximately $16,117,000 (2020 $15,817,000) which may be carried forward and applied against taxable income in the future. These losses, if not utilized, will expire starting in 2026 through 2040.

18. CONTINGENCY

In January 2021, Denton Resources Ltd. (“Denton”) commenced legal action against the Company seeking settlement of an outstanding amount relating to the Carscallan Drilling Program incurred in 2019. As of August 31, 2021, $48,934 was included in accounts payable in relation to the claim.

19. SUBSEQUENT EVENT

On December 11, 2019, the Company completed a shares-for-debt transaction to settle a debt of $120,000 owed to a former director with an issuance of 2,400,000 shares at $0.05 per share.