Element79 Gold Corp. — Interim / Quarterly Report 2021

Jul 30, 2021

Condensed Interim Financial Statements For the Nine Months Ended May 31, 2021

(Expressed in Canadian dollars)

(Unaudited)

Condensed Interim Statements of Financial Position

(Expressed in Canadian dollars) (Unaudited)

		As at May 31, 2021	As at August 31, 2020
	Notes		(audited)
ASSETS		\$	\$
Current assets
Cash and cash equivalents		447,100	66,257
Amounts receivable		10,423	650
Prepaid expenses		-	10,000
		457,523	76,907
Exploration and evaluation assets	4	93,948	29,941
Total assets		551,471	106,848
LIABILITIES
Current liabilities
Trade payables and accrued liabilities		29,308	6,000
EQUITY AND LIABILITIES
Equity
Share capital	7	890,357	51,600
Share subscriptions received in advance	7	-	63,000
Contributed surplus		338,512	-
Deficit		(706,706)	(13,752)
		522,163	100,848
Total equity and liabilities		551,471	106,848

Nature of operations and going concern (Note 1) Commitments and contingencies (Note 13)

APPROVED BY THE BOARD:

"Konstantin Lichtenwald" "Julie Hajduk" Konstantin Lichtenwald Julie Hajduk

"Julie Hajduk"
Julie Hajduk

Condensed Interim Statements of Loss and Comprehensive Loss For the Three and Nine months Ended May 31, 2021, and For the Period from the Date of Incorporation on February 27, 2020 to August 31, 2020

(Expressed in Canadian dollars)

(Unaudited)

	Notes	Three Months ended May 31, 2021	Nine Months ended May 31, 2021	Period from February 27, 2020 to August 31, 2020
		\$	\$	\$
Expenses Advertising and marketing		-	-	6,825
Consulting fees		-	2,500	-
Financing fees	5	-	358,724	-
Investor Relations and marketing		29,506	29,506	-
Listing and filing fees		-	18,861	-
Management fees		30,000	90,000	-
Office expenses & Misc.		21,688	33,536	204
Professional fees		2,500	30,039	6,723
Share-based compensation		11,521	129,788	-
Net and comprehensive loss for the period		(95,215)	(692,954)	(13,752)
Loss per share Basic and diluted	8	(0.00)	(0.02)	(0.00)
Weighted average number of common shares issued and outstanding		43,545,989	29,238,216	9,633,979

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

Condensed Interim Statements of Cash Flows

For the Nine Months Ended May 31, 2021, and

For the Period from the Date of Incorporation on February 27, 2020 to August 31, 2020

(Expressed in Canadian dollars)

(Unaudited)

			Period from
		Nine Months	February 27,
		ended	2020 to
		May 31,	August 31,
	Notes	2021	2020
		\$	\$
OPERATING ACTIVITIES
Loss for the period		(692,954)	(13,752)
Non-cash items
Shares issued for consulting fees		2,500	-
Shares issued for financing fees		150,000	-
Share-based compensation		129,788	-
Warrants issued for financing fees		208,724	-
Changes in operating working capital:
Decrease (increase) in prepaid expenses		10,000	(10,000)
Increase in amounts receivable		(9,773)	(650)
Increase (decrease) in trade payables and accrued
liabilities		23,308	6,000
Cash used in operating activities		(178,407)	(18,402)
INVESTING ACTIVITIES
Exploration and evaluation properties expenditures	4	(54,007)	(28,341)
Cash used in investing activities		(54,007)	(28,341)
FINANCING ACTIVITIES
Issuance of special warrants	7	617,132	50,000
Share subscriptions received in advance		-	63,000
Share issue costs		(3,875)	-
Cash from financing activities		613,257	113,000
Increase in cash		380,843	66,257
Cash, beginning of period		66,257	-
Cash, end of period		447,100	66,257

Supplemental cash flow information (Note 9)

Condensed Interim Statements of Changes in Equity For the Nine Months Ended May 31, 2021, For the Period from the Date of Incorporation on February 27, 2020 to August 31, 2020 (Expressed in Canadian dollars)

(Unaudited)

			Share subscriptions
	Number of common shares	Common shares	received in advance	Contributed surplus	Deficit	Total
		\$	\$	\$	\$	\$
Balances, February 27, 2020	1	-	-	-	-	-
Common shares issued for cash	10,000,000	50,000	-	-	-	50,000
Common shares issued for exploration and
evaluation assets	80,000	1,600	-	-	-	1,600
Share subscriptions received in advance	-	-	63,000	-	-	63,000
Net loss for the period	-	-	-	-	(13,752)	(13,752)
Balances, August 31, 2020	10,080,001	51,600	63,000	-	(13,752)	100,848
Special warrants issued for cash	30,521,320	680,132	(63,000)	-	-	617,132
Shares issued for mineral properties	200,001	10,000	-	-	-	10,000
Shares issued for consulting fees	50,000	2,500	-	-	-	2,500
Shares issued for financing fees (Note 5)	3,000,000	150,000	-	-	-	150,000
Share issue costs	-	(3,875)	-	-	-	(3,875)
Warrants issued for financing fees (Note 5)	-	-	-	208,724	-	208,724
Share-based compensation	-	-	-	129,788	-	129,788
Net loss for the period	-	-	-	-	(692,954)	(692,954)
Balances, May 31, 2021	43,851,322	890,357	-	338,512	(706,706)	522,163

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

1. NATURE OF OPERATIONS AND GOING CONCERN

Element79 Gold Corp., ("Element79" or the "Company") was incorporated under the Company Act (British Columbia) on February 27, 2020. The Company is an exploration stage company engaged in the acquisition, exploration and development of mineral properties.

The address of the Company's corporate office and principal place of business is Suite 230, 997 Seymour Street, Vancouver B.C., V6B 3M1.

Going concern

These unaudited condensed interim financial statements have been prepared on a going concern basis, which assumes that the Company will be able to continue its operations and will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As at May 31, 2021, the Company had cash of \$447,100, liabilities of \$29,308 and incurred accumulated losses of \$706,706 since inception.

The Company is a mineral exploration company focusing on the acquisition and development of mineral property interests. The Company's continuation as a going concern and the underlying value and recoverability of the carrying amounts for exploration and evaluation assets are entirely dependent upon the discovery of economically recoverable mineral reserves, the ability of the Company to raise equity capital or borrowings sufficient to meet current and future obligations and to complete the exploration and development of mineral property interests, and achievement of future profitable production from or proceeds from the disposition of its mineral property interests. These material uncertainties cast significant doubt upon the Company's ability to continue as a going concern. Should the Company be unable to continue as a going concern, the net realizable value of its assets may be materially less than the amounts on its statements of financial position.

In March 2020, the World Health Organization declared a global pandemic known as COVID-19. This is causing significant financial market and social dislocation. This has also resulted in significant economic uncertainty and consequently, it is difficult to reliably measure the potential impact of this uncertainty on the Company's future financial results.

2. BASIS OF PREPARATION

Basis of presentation

These condensed interim financial statements have been prepared on an accrual basis and are based on historical costs, modified where applicable. The financial statements are presented in Canadian dollars, which is also the Company's functional currency, except where otherwise indicated, and all values are rounded to the nearest dollar.

2. BASIS OF PREPARATION (continued)

Statement of compliance

These condensed interim financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 – Interim Financial Reporting under International Financial Reporting Standards ("IFRS") issued by the International Accounting standards Board ("IASB"). These condensed interim financial statements follow the same accounting policies and methods of application as the most recent annual consolidated financial statements of the Company. These condensed interim financial statements do not contain all of the information required for full annual financial statement do not contain all of the information required for full annual financial statements. Accordingly, these unaudited condensed interim financial statements should be read in conjunction with the Company's August 31, 2020, annual financial statements, which were prepared in accordance with IFRS as issued by the IASB.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

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

The critical judgements and estimates applied in the preparation of these condensed interim financial statements are consistent with those applied in and disclosed in note 4 of the audited financial statements for the period from the date of inception on February 27, 2020 to August 31, 2020.

(Unaudited)

4. EXPLORATION AND EVALUATION ASSETS

Exploration and evaluation properties includes the following amounts as at May 31, 2021:

	Dale Property
	\$
ACQUISITION COSTS
Balance, February 27, 2020	-
Cash payments	12,000
Shares issued	1,600
Balance, August 31, 2020	13,600
Shares issued	10,000
Balance, May 31, 2021	23,600
EXPLORATION AND EVALUATION COSTS
Balance, February 27, 2020	-
Field expenses	921
Assaying and Sampling	5,000
NI43-101 Report	10,420
Balance, August 31, 2020	16,341
Assaying and Sampling	1,010
Claims maintenance fee	2,220
Exploration program	36,966
Field expenses	1,782
NI43-101 Report	12,029
Balance, May 31, 2021	70,348
Total costs	93,948

Dale Property

On April 7, 2020, the Company entered into a property option agreement with Jean Marc Gaudreau ("Optionor") to acquire a 100% right, title and interest in and to the Dale property ("Property"), subject only to a NSR Royalty.

The Property is located in Ontario, Canada and is comprised of 90 Mineral Rights, covering an area of approximately 1735 hectares.

In order to exercise the option, the Company must complete the following requirements:

• a) Make aggregate cash payments of \$127,000 as follows:
• a. \$12,000 within 30 days of the date of the option agreement (paid)
• b. \$15,000 on or before December 31, 2021
• c. \$18,000 on or before December 31, 2022
• d. \$21,000 on or before December 31, 2023
• e. \$51,000 on or before December 31, 2024

For the Nine months ended May 31, 2021

(Expressed in Canadian dollars) (Unaudited)

4. EXPLORATION AND EVALUATION ASSETS (continued)

• b) Issue a total of 200,001 common shares of the Company at a deemed price of \$0.05 per share within 180 days of the option agreement (issued) (Note 7). Shares are subject to a 4-month hold period from the date of the public listing on the Canadian Stock Exchange.
• c) Make aggregate share payments totaling \$192,000 calculated at the price of the average VWAP of the 10 trading days prior to the issuance date:
• a. \$30,000 on or before December 31, 2021
• b. \$33,000 on or before December 31, 2022
• c. \$36,000 on or before December 31, 2023
• d. \$93,000 on or before December 31, 2024
• d) Execute and deliver to the Optionor on the Closing Date the NSR Royalty granting the Optionor a 0.5% NSR royalty on the Property, subject to the right of the Company to re-purchase 100% of the NSR Royalty for a total consideration of \$525,000 at any time.

A pre-existing 1% NSR to the benefit of Keystone Associates Inc. existed on the property prior to this agreement and is additional to the 0.5% NSR required as part of Element79's option to purchase.

In addition to the option agreement, the Company paid a finder's fee of 80,000 common shares valued at \$1,600 to a third party (Notes 7 and 9).

5. EQUITY DRAWDOWN FACILITY

In September 2020, the Company entered into a non-revolving Equity Drawdown Facility (the "Facility") that allows the Company to utilize funding for an aggregate amount of \$5,000,000. The Company can draw down funds from the Facility from time to time during the three-year term at the Company's discretion by providing a notice ("Drawdown Notice") to the investor Crescita Capital LLC ("Investor"), and in return for each Drawdown Notice, the Company will allot and issue fully paid shares to the Investor in form of a "Private Placement". The shares issued in connection with any Private Placement will be priced at the higher of (i) \$0.05 and (ii) 90% of the volume-weighted average price of the Shares for the ten trading days prior to the issue date of such Shares.

In connection with the Facility, the Company paid a 3% commission in shares (3,000,000 common shares valued at \$150,000) and issued share purchase warrants equal to 8.5% of the outstanding shares of the Company at the time of closing of the Facility. Each of the 3,394,050 share purchase warrants can be exercised to purchase one common share of the Company at a price of \$0.10 per share until October 1, 2023 (Note 7).

6. RELATED PARTY TRANSACTIONS

Key management personnel compensation

During the nine months ended May 31, 2021, the Company paid \$90,000 to key management personnel, of which \$45,000 was paid to the CEO and \$45,000 was paid to a director of the Company.

6. RELATED PARTY TRANSACTIONS (continued)

Key management personnel compensation (continued)

The Company also granted 1,100,000 stock options to directors and officers of the Company and recognized related share-based compensation of \$81,312 (Note 7).

As at May 31, 2021, \$13,558 was due to the CFO for expenses incurred on behalf of the Company. No amounts were due from any key management personnel.

7. SHARE CAPITAL

Authorized share capital

The Company has an authorized share capital of an unlimited number of common shares with no par value.

As at May 31, 2021, the Company had 43,851,322 common shares issued and outstanding.

Share issuance

On April 30, 2021, 460,500 special warrants converted to 460,500 common shares of the Company.

On February 26, 2021, 410,820 special warrants converted to 410,820 common shares of the Company.

On January 3, 2021, 29,650,000 special warrants converted to one common share and one half share purchase warrant. Each full share purchase warrant can be exercised to purchase one additional common share of the Company at a price of \$0.10 per common share until September 2, 2023.

On October 1, 2020, the Company issued 3,000,000 common shares to Crescita valued at \$150,000 as financing fees related to the Facility (Note 5).

On October 1, 2020, the Company issued additional 50,000 common shares to Crescita valued at \$2,500 as consulting fee for advisory services to be provided by Crescita.

On September 18, 2020, the Company issued 200,001 common shares valued at \$10,000 to the owners of the Dale Property to satisfy the initial payment of the mineral property option agreement (Note 4).

On April 7, 2020, the Company issued 80,000 common shares valued at \$1,600 as finder's fees for the introduction of the Company to the owners of the Dale Property (Notes 4 and 9).

On March 6, 2020, the Company issued 10,000,000 units for proceeds of \$50,000. Each unit consists of one common share and one share purchase warrant. Each share purchase warrant is exercisable for \$0.10 per common share until March 6, 2025.

(Unaudited)

7. SHARE CAPITAL (continued)

Special warrants

On December 29, 2020, investors subscribed to 460,500 special warrants at a price of \$0.10 per special warrant for total proceeds of \$46,050. On April 30, 2021, each special warrant converted to one common share of the Company.

On October 25, 2020, investors subscribed to 410,820 special warrants at a price of \$0.10 per special warrant for total proceeds of \$41,082. On February 26, 2021, each special warrant converted to one common share of the Company.

On September 2, 2020, investors subscribed to 29,650,000 special warrants at a price of \$0.02 per special warrant for total proceeds of \$593,000. On January 3, 2021, each special warrant converted to one common share and one half share purchase warrant of the Company. Each full share purchase warrant can be exercised to purchase one additional common share of the Company at a price of \$0.10 per share until September 2, 2023.

Share purchase warrants

On January 3, 2021, 29,650,000 special warrants converted to one common share and one half share purchase warrant. Each full share purchase warrant can be exercised to purchase one additional common share of the Company at a price of \$0.10 per common share until September 2, 2023.

On October 1, 2020, the Company issued 3,394,050 share purchase warrants to Crescita as part of the financing fees (Note 5). The warrants have an exercise price of \$0.10 per common share and are exercisable for three years until October 1, 2023.

On March 6, 2020, the Company issued 10,000,000 units for proceeds of \$50,000. Each unit consists of one common share and one share purchase warrant. Each share purchase warrant is exercisable for \$0.10 per common share until March 6, 2025.

As at May 31, 2021, the following share purchase warrants were outstanding:

Number of warrants	Exercise price	Expiry date
14,825,000	\$0.10	September 2, 2023
3,394,050	\$0.10	October 1, 2023
10,000,000	\$0.10	March 6, 2025
28,219,050	\$0.10

7. SHARE CAPITAL (continued)

Stock options

On November 20, 2020, the Company adopted a Stock Option Plan which provides that the Board of Directors may from time to time, at its discretion, grant options exercisable over periods of up to 10 years and will not have an exercise price lower than the greater of the closing market price of the underlying securities on (a) the trading day prior to the date of grant of the stock options; and (b) the date of grant of the stock options. The maximum number of common shares which may be issued pursuant to options granted under the Stock Option Plan will be 10% of the issued and outstanding common shares at the time of the grant. In addition, the number of common shares which may be reserved for issuance to any one individual may not exceed 5% of the issued shares in any 12 month period or 2% if the optionee is engaged in investor relations activities or is a consultant. The Stock Option Plan contains no vesting requirements, other than for consultants performing investor relations activities but permits the Board to specify a vesting schedule at its discretion.

On April 15, 2021, the Company granted 600,000 stock options to a consultant of the Company. The stock options have an exercise price of \$0.10 per common share, vest at a rate of 50,000 stock options per month over 12 months and are exercisable for five years until December 31, 2025.

The fair value of these stock options was determined to be \$44,550, and the Company expensed \$11,521 during the three and nine months ended May 31, 2021 in relation to the vesting of these stock options. The value was determined using the Black-Scholes Option Pricing Model using the following assumptions:

	Nine months ended
	May 31, 2021
Risk-Free Annual Interest	0.92%
Expected Volatility	100.00%
Expected Life of Option	5 years
Expected Annual Dividend	0%

On December 31, 2020, the Company granted 500,000 stock options to a consultant of the Company. The stock options have an exercise price of \$0.10 per common share and are exercisable for five years until December 31, 2025.

The fair value of these stock options was determined to be \$36,955 using the Black-Scholes Option Pricing Model using the following assumptions:

	Nine months ended
	May 31, 2021
Risk-Free Annual Interest	0.40%
Expected Volatility	100.00%
Expected Life of Option	5 years
Expected Annual Dividend	0%

(Unaudited)

7. SHARE CAPITAL (continued)

Stock options (continued)

On November 20, 2020, the Company granted 1,100,00 stock options to certain directors, officers, and consultants of the Company. The stock options have an exercise price of \$0.10 per common share and are exercisable for five years until November 20, 2025.

The fair value of these stock options was determined to be \$81,312 using the Black-Scholes Option Pricing Model using the following assumptions:

	Nine months ended
	May 31, 2021
Risk-Free Annual Interest	0.42%
Expected Volatility	100.00%
Expected Life of Option	5 years
Expected Annual Dividend	0%

8. LOSS PER SHARE

The basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the year. The diluted loss per share reflects the potential dilution of common share equivalents, such as outstanding stock options, share purchase warrants and convertible debentures, in the weighted average number of common shares outstanding during the year, if dilutive. As at May 31, 2021, basic and diluted loss per share are the same, as stock options or share purchase warrants have an anti-dilutive effect.

9. SUPPLEMENTAL CASH FLOW INFORMATION

During the nine months ended May 31, 2021, the Company had the following non-cash investing and financing transactions:

During the nine months ended May 31, 2021, the Company issued 200,001 common shares valued at \$10,000 to the owners of the Dale Property to satisfy the initial payment of the mineral property option agreement (Notes 4 and 7).

During the nine months ended May 31, 2021, the Company issued 3,000,000 common shares to Crescita valued at \$150,000 as financing fees related to the Facility (Notes 5 and 7).

On April 7, 2020, the Company issued 80,000 common shares valued at \$1,600 as finder's fees for the introduction of the Company to the owners of the Dale Property (Notes 4 and 7).

Notes to the Condensed Interim Financial Statements

For the Nine months ended May 31, 2021

(Expressed in Canadian dollars) (Unaudited)

10. FINANCIAL INSTRUMENTS

Categories of financial instruments

	August 31,
May 31, 2021	2020
	\$
447,100	66,257
10,423	650
457,523	66,907
29,308	6,000
29,308	6,000
	\$

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

• Market Risk
• Credit Risk
• Liquidity Risk
• Currency Risk

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

There have been no substantive changes in the Company's exposure to financial instrument risks, its objectives, polices and processes for managing those risks or the methods used to measure them from previous years unless otherwise stated in the note.

General Objectives, Policies and Processes

The Board of Directors has overall responsibility for the determination of the Company's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company's finance function. The Board of Directors receives monthly reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

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

10. FINANCIAL INSTRUMENTS (continued)

Market Risk

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

Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company does not have any borrowings. Interest rate risk is limited to potential decreases on the interest rate offered on cash and cash equivalents held with chartered Canadian financial institutions. This risk is considered minimal.

Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its cash. The Company limits exposure to credit risk by maintaining its cash with major financial institutions.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages liquidity risk by maintaining adequate cash and restricted cash balances. The Company continuously monitors both actual and forecasted cash flows and matches the maturity profile of financial assets and liabilities.

As at May 31, 2021, the Company had a cash balance of \$447,100 and gross receivables of \$10,423 to settle current liabilities due in twelve months or less of \$29,308 and carry out its planned exploration program in the coming year. Management seeks additional financing through the issuance of equity instruments to continue its operations. There can be no assurance it will be able to do so.

Currency Risk

The Company might be exposed to currency risk by incurring certain expenditures in currencies other than the Canadian dollar. The Company does not use derivative instruments to reduce its currency risk. During the nine months ended May 31, 2021, the Company has not had foreign currency transactions, and therefore was not exposed to currency risk.

Determination of Fair Value

Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

The carrying amounts for cash, amount receivable and trade payable and accrued liabilities approximate fair value due to their short-term nature.

Notes to the Condensed Interim Financial Statements

For the Nine months ended May 31, 2021

(Expressed in Canadian dollars) (Unaudited)

11. CAPITAL DISCLOSURES

The Company's objectives when managing capital are to maintain an appropriate capital base in order to:

• 1. Advance the Company's corporate strategies to create long-term value for its stakeholders;
• 1. Sustain the Company's operations and growth throughout metals and materials cycles; and
• 1. Ensure compliance with the covenants of any applicable credit facility and other financing facilities used from time to time.

The Company monitors its capital and capital structure on an ongoing basis to ensure it is sufficient to achieve the Company's short-term and long-term strategic objectives. Management primarily funds the Company's exploration by issuing share capital, rather than using other capital sources that require fixed repayments of principal and interest. Management closely monitors its cash balance. The balance of cash as at May 31, 2021, was \$447,100 (August 31, 2020 – \$66,257). The Company does not currently have significant debt outstanding and there are presently no formal capital requirements with which the Company has not complied.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is appropriate.

12. SEGMENTED INFORMATION

The Company's only business activity is exploration and development of exploration and evaluation properties carried out in Canada.

13. COMMITMENTS AND CONTINGENCIES

As at May 31, 2021, the Company owns one exploration and evaluation property (Note 4). Management does not consider that any amounts related to decommissioning liabilities are payable although there is no assurance that a formal claim will not be made against the Company for some or all of these obligations in the future.

14. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements of the Company for the nine months ended May 31, 2021 were approved and authorized for issue by the Board of Directors on July 30, 2021.