Emergent Metals Corp. — Interim / Quarterly Report 2021

Nov 25, 2021

EMGOLD MINING CORPORATION

(AN EXPLORATION STAGE COMPANY)

U NAUDITED C ONDENSED I NTERIM

C ONSOLIDATED F INANCIAL S TATEMENTS

F OR T HE P ERIOD E NDED 30 S eptember 2021 AND 2020

Stated in US Dollars

Table of Contents

Table of Contents	Table of Contents
Notice to Reader ............................................................................................................................................................. i
Consolidated Statements of Financial Position.............................................................................................................. 1
Condensed Interim Consolidated Statements of Comprehensive Income (Loss) ......................................................... 2
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity ...................................................... 3
Condensed Interim Consolidated Statements of Cashflows.......................................................................................... 4
Notes to the Condensed Interim Consolidated Financial Statements ........................................................................... 5
1)	Nature of operations and going concern .............................................................................................................. 5
2)	Basis of preparation – Statement of Compliance ................................................................................................. 5
3)	Critical accounting judgments and key sources of estimation uncertainty .......................................................... 6
4)	Financial instruments and risk management ........................................................................................................ 7
5)	Accounts receivable………………………………………………………………………………………………………………………………………10
6)	Marketable securities……………………………………………………………………………………………………………………………………10
7)	Assets held for sale……………………………………………………………………………………………………………………………………….10
8)	Exploration and evaluation assets ...................................................................................................................... 11
9)	Related party transactions .................................................................................................................................. 18
10)	Share capital ........................................................................................................................................................ 19
11)	Flow-through shares premium liability ............................................................................................................... 22
12)	Leases – right of use assets and lease liabilities ................................................................................................. 23
13)	Capital disclosures ............................................................................................................................................... 24
14)	Segmented disclosure ......................................................................................................................................... 24
15)	Commitment ....................................................................................................................................................... 24
16)	Events after the report period ............................................................................................................................ 25

NOTICE TO READER

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the interim financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management. The unaudited condensed interim financial statements have been prepared using accounting policies in compliance with International Financial Reporting Standards for the preparation of the condensed interim financial statements and are in accordance with IAS 34 – Interim Financial Reporting .

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

EMGOLD MINING CORPORATION US Dollars

Statement 1

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

CONSOLIDATEDSTATEMENTS OFFINANCIAL POSITION
	As at
Note	September 30 December 31 2021 2020
ASSETS
Current assets
Cash	437,883 $ 1,194,539 $
Amounts receivable 5	129,624 148,403
Marketable securities 6 Prepaid expenses Due from related parties 8 Non-current assets Advance payments for assets acquisition 7 (d) Deposit Equipment 10 Exploration and evaluation assets 7 Reclamation bonds	368,790 763,437 12,825 383,571 7,745 19,489
	956,867 2,509,439
	– 152,100 4,500 9,732 62,599 74,041 2,867,464 2,602,477 2,148 –
Right-of-use asset 12	33,629 11,986
	2,970,340 2,850,336
Total Assets	3,927,207 $ 5,359,775 $
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities Deposit received	178,902 361,106 1,250 50
Due to related parties 8 Flow-through share premium liability 11	22,066 214,308 119,350 91,633
Lease liability 12	15,487 7,129
Warrant liability 9 (d)	986,217 2,082,156
	1,323,272 2,756,382
Lease liability 12	20,546 –
Total liabilities	1,343,818 2,756,382
SHAREHOLDERS' EQUITY
Share capital 9 Shares to be cancelled Warrants - reserve 9 Options - reserve 9 Accumulated Deficit	48,294,173 47,869,337 – (3,586) 981,303 956,303 7,865,859 7,865,859 (54,557,946) (54,084,520)
	2,583,389 2,603,393
Total liabilities and equity	3,927,207 $ 5,359,775 $

Nature of operations and going concern (Note 1) Commitments (Note 15) Events after the Reporting Period (Note 16)

Approved and authorized for issuance by the board of directors on November 24, 2021

"David Watkinson" Andrew MacRitchie David Watkinson, Director Andrew MacRitchie, Director

The accompanying notes are an integral part of these condensed interim consolidated financial statements 1 | P a g e

EMGOLD MINING CORPORATION US Dollars

Statement 2

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATEDSTATEMENTS OFCOMPREHE	NSIVE	INCOME(LOSS)	INCOME(LOSS)	INCOME(LOSS)
		Three months ended			September 30,		Nine months ended		September
	Note		2021		2020		2021		2020
EXPENSES
Exploration and Evaluation
Resource property expense	7	$	192,501	$	174,347	$	819,284	$	291,774
General and Administrative
Advertising and promotion			39,530		266,685		200,753		369,938
Amortization	10		3,814		4,302		11,443		4,302
Banking costs			267		448		605		1,368
Depreciation of right-of-use asset	12		3,809		6,002		21,954		17,615
Insurance			5,894		3,735		17,459		9,625
Listing and filing fees			14,236		26,282		33,840		56,316
Management and consulting			47,703		170,928		255,963		385,875
Professional fees			26,959		41,388		77,836		102,850
Office and administration			5,543		24,096		17,081		32,621
Rent			5,010		4,500		18,063		13,500
Share based compensation	9		–		–		–		181,584
Travel			4,540		5,747		14,953		26,982
Net Loss Before Other Items			(349,806)		(728,460)		(1,489,234)		(1,494,350)
Other Items
Sublet income			5,400		3,000		16,350		13,050
Other income			–		–		–		10,000
Financing charges			–		(70)		–		(286)
Lease liability accetion expense	12		(1,475)		(1,963)		(4,296)		(5,642)
Foreign exchange gain			(11,814)		(3,691)		22,365		(23,790)
Gain on disposition of assets			–		–		–		504,404
Gain on disposition of marketable securities	6		–		291,066		68,832		359,534
Fair value adjustment for marketable securities	6		(89,766)		(151,831)		(321,409)		255,226
Fair value adjustments for warrant liability	9		137,323		109,053		1,233,966		246,554
Income(Loss)and comprehensive income(loss)			(310,138)		(482,896)		(473,426)		(135,300)
Earnings (Loss) per share, basic and diluted			(0.00)		(0.01)		(0.00)		(0.00)
Weighted average number of common shares
outstanding - basic and diluted			134,220,664		92,359,134		128,654,781		75,144,578

The accompanying notes are an integral part of these condensed interim consolidated financial statements 2 | P a g e

EMGOLD MINING CORPORATION US Dollars

Statement 3

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

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Number of Number of Number of
Outstanding Shares to be Outstanding Reserves Outstanding
Shares Share Capital cancelled Warrants Warrants Options Reserves Options Deficit
–
Balance, December 31, 2019 62,276,506 $ 47,264,277 $ 28,485,233 $ 803,764 3,625,000 $ 7,348,039 $ (53,726,683)
Private Placement - Flow-through – 504,322 – 5,205,000 – – – –
Share issuance costs - Flow-through – (84,477) 628,600 34,127 – – –
Private Placement - Non flow-through – 152,464 – 48,746,110 – – – –
Share issuance costs - Non flow-through – (233,587) 2,243,118 126,869 – – –
Shares issued for properties 4,000,000 246,305 – – – – – –
Shares issued for service 250,000 13,412 – – – – – –
Options granted – – – – – 3,000,000 181,584 –
Warrants expired – – – – – – – –
Comprehensive (loss) for the period – – – – – – – (135,300)
-
Balance, September 30, 2020 66,526,506 $ 47,862,716 $ $ 85,308,061 $ 964,760 $ 6,625,000 $ 7,529,623 $ (53,861,983)
Balance, December 31, 2020 126,032,616 $ 47,869,337 $ (3,586) 71,677,013 $ 956,303 12,575,000 $ 7,865,859 $ (54,084,520)
Expired – – – (2,230,800) – – – –
Private Placement - Flow-through 10,500,000 498,440 – 5,250,000 – – – –
Share issuance costs - Flow-through – (73,604) – 750,000 25,000 – – –
Shares cancelled (349,995) – 3,586 (349,995) – – – –
Comprehensive (loss) for the period – – – – – – – (473,426)
Balance, September 30, 2021 136,182,621 $ 48,294,173 $ – 75,096,218 $ 981,303 12,575,000 $ 7,865,859 $ (54,557,946)
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The accompanying notes are an integral part of these condensed interim consolidated financial statements 3 | P a g e

EMGOLD MINING CORPORATION US Dollars

Statement 4

CONSOLIDATED STATEMENT OF CASHFLOWS

CONSOLIDATEDSTATEMENTOF CASHFLOWS
		Nine months ended
		September 30,
	Note	2021	2020
		$	$
Operating activities
Income (Loss) for the period		(473,426)	(135,300)
Items not affecting cash:
Amortization of equipment	10	11,443	4,302
Depreciation of right-of-use assets	12	21,954	17,615
Lease liability accretion expense	12	4,296	5,642
Unrealized foreign exchange loss		(25,757)	15,702
Fair value adjustment for marketable securities	6	321,409	(255,226)
Fair value adjustments for warrant liability	9	(1,233,966)	(246,554)
Gain on disposition of assets		–	(504,404)
Gain on disposition of marketable securities	6	(68,832)	(359,534)
Share issued for service		–	13,412
Share-based compensation		–	181,584
Changes in non-cash operating working capital
Amounts receivable		65,909	51,306
Deposit received		1,200	–
Prepaid expenses and deposits		369,035	(62,468)
Accounts payable and accrued liabilities		(182,205)	(227,197)
Due to relatedparties		(180,498)	41,909
Cash used in operatingactivities		(1,369,438)	(1,459,211)
Investing activities
Equipment purchase		–	(54,723)
Reclamation bond		(2,148)	–
Resource properties royalty payments received		10,000	10,000
Proceeds from sale of mineral property		–	68,980
Proceeds from sale of marketable securities		168,516	857,363
Acquisition of mineralproperpties		(237,760)	(194,616)
Cash(used in) provided byinvestingactivities		(61,392)	687,004
Financing activities
Lease payments on principal portion		(7,680)	(4,559)
Net proceeds from units issued for cash		618,449	3,095,903
Collection of subscription receivable		67,743	–
Cashprovided byfinancingactivities		675,832	3,091,344
(Decrease) in cash		(754,998)	2,319,137
Exchange difference on cash		(1,658)	4,943
Cash, beginning ofyear		1,194,539	160,361
Cash, end ofperiod		437,883	2,484,441

The accompanying notes are an integral part of these condensed interim consolidated financial statements 4 | P a g e

EMGOLD MINING CORPORATION For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of operations and going concern

Emgold Mining Corporation (“the Company” or “Emgold”) is incorporated under the British Columbia Corporations Act and the principal place of business is located at 1010 - 789 West Pender Street, Vancouver, British Columbia, V6C 1H2. The Company’s business model is to acquire, explore, and divest of mineral property interests (an A&D model) with the goal of creating value for our shareholders. Acquisitions or divestitures could be purchase or sale of assets, option or joint venture of assets, royalty transaction, or other business transactions that are a fit for a specific asset. The Company’s shares are traded on the TSX Venture Exchange (“TSX-V”) under the symbol EMR, the OTCQB Market under the symbol EGMCF, and the Frankfurt (“FRA”) and Berlin (“BSE”) Stock Exchanges under the symbol EMLM.

These audited consolidated financial statements have been prepared on the basis of the accounting principles applicable to a going concern, which assumes the Company’s ability to continue in operation for the foreseeable future and to realize the potential of its assets and discharge its liabilities in the normal course of operations. The Company currently has a negative operating cash flow and has incurred operating losses since inception. The Company generates revenue by the sale of common shares of public mining companies it owns, revenue generated by the sale, joint venture, option, or other transactions related to its assets, or through equity financings, where the amount or timing of revenue cannot be guaranteed.

The Company is currently unable to self-finance 100% of its planned operations for the 2020 fiscal year and has ongoing cash needs to meet its overhead requirements, maintain its exploration assets, and complete planned exploration activities. The generation of revenue form it exploration assets is dependent upon several factors, which include the discovery and/or expansion of mineral resources or reserves on each of its properties, the ability of the Company to obtain the necessary financing to advance exploration on these properties, the ability of the Company to make property, advance royalty, or claim maintenance payments to hold these properties, or the completion of transactions with third parties that generate revenue in the short and long term. The generation of revenue from equity financings is dependent upon several factors including the impact of Covid-19 on financial markets, the price of gold, and other impacts to financial markets that are beyond the control of the Company.

As at September 30, 2021, the Company had working capital deficit of $366,405 including the warrant derivative liability of $986,217 (December 31, 2020 working capital deficit - $246,943 including the warrant derivative liability of $2,082,156) and an accumulated deficit of $54,557,946 (December 31, 2020 - $54,084,520) and expects to incur further loss in the development of its business. For the Company to continue to operate as a going concern it must obtain additional revenue; there can be no assurance that this will continue in the future. As a result, there is a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern and accordingly use accounting principles applicable to a going concern.

If the going concern assumption were not appropriate for these condensed interim consolidated financial statements, adjustments would be necessary to the carrying value of assets and liabilities, the reported expenses and the statement of financial position classifications used. Such adjustments could be material.

2. Basis of Preparation

a) Statement of Compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The condensed interim consolidated financial statements were authorized for issue by the Board of Directors on November 24, 2021.

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EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

b) Basis of Measurement

The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified as financial instruments at fair value through profit and loss, which are stated at their fair value. In addition, the consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information. Summary of Significant Accounting Policies. The accounting policies and methods of computation followed in preparing these Financial Statements are the same as those followed in preparing the most recent audited annual financial statements. For a summary of significant accounting policies, please refer to the Company’s audited annual financial statements for the year ended 31 December 2020.

3. Critical accounting judgement and key sources estimation uncertainty

In the application of the Company’s accounting policies management is required to make judgments, estimates and assumptions about the carrying amount and classification of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revisions affect only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

The following are the critical judgments and areas involving estimates, that management have made in the process of applying the Company’s accounting policies and that have the most significant effect on the amount recognized in the consolidated financial statements.

a) Critical judgments in applying accounting policies

Going concern assumption

These consolidated financial statements have been prepared on the basis of the accounting principles applicable to a going concern, which assumes the Company’s ability to continue in operation for the foreseeable future and to realize its assets and discharge its liabilities in the normal course of operations. There are several adverse conditions that cast substantial doubt upon the soundness of this assumption. Refer to note 1 for more details.

Determination of functional currency

In accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates , management determined that the functional currency of the Company and its wholly owned subsidiaries is the US dollar. The assessment of the Company’s functional currency and the functional currency of its subsidiaries involves judgment regarding the primary economic environment the Company and its subsidiaries operate in.

Exploration and evaluation assets

The Company makes certain judgements and assumptions regarding indicators of impairment and the recoverability of the carrying values of exploration and evaluation assets. Management has assessed for impairment indicators for the Company’s properties and has concluded that no indicators of impairment as at September 30, 2021.

b) Key sources of estimation uncertainty

Share based payments and fair value of warrants

Management assesses the fair value of stock options granted in accordance with the accounting policy stated in note 3. The fair value of stock options granted is measured using the Black-Scholes option pricing model, which was created for use in estimating the fair value of freely tradable, fully transferable options.

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EMGOLD MINING CORPORATION For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The following assumptions are used in the model: dividend yield; expected volatility; risk-free interest rate and expected option life. Changes to assumptions used to determine the grant date fair value of share-based compensation awards can affect the amounts recognized in the consolidated financial statements.

The inputs used in the IFRS 16 accounting

The significant judgments, estimates, and assumptions made by management applied in the preparation of these consolidated financial statements, specifically as they relate to IFRS 16 Leases, primarily included evaluating the appropriate discount rate to use to discount the lease liability for each lease, as well as determining the lease term, when the lease contained an extension option, and assessing if the Company was reasonably certain that it would exercise the extension option. Significant judgments, estimates, and assumptions over both factors would affect the present value of the lease liabilities upon adoption of the new accounting standard, as well as the associated value of the right-of-use assets.

Fair value of warrants derivative

The Company has determined that its functional currency is the US dollar and has issued warrants with exercise price fixed in Canadian Dollar. The Company measures the cost of the warrants derivative by reference to the fair value on the grant date and revalues them at each reporting date. In determining the fair value of the warrants, the Company used the Black-Scholes option pricing model with the following assumptions: average volatility rate; market price at the reporting date; risk-free interest rate; the remaining expected life of the warrant and an exchange rate at the reporting date. The inputs used in the Black-Scholes model are taken from observable markets.

Changes to assumptions used can affect the amounts recognized in the consolidated financial statements.

Income taxes

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.

4. Financial instruments and risk management

a) Classification

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 if the Company has opted to measure them at FVTPL.

The following table shows the classifications:

The following table shows the classifications:
Financial assets	Classification
Cash	Amortized cost
Marketable securities	FVTPL
Reclamation bonds	Amortized cost
Accounts receivable excludes goods and services tax	Amortized cost
Due from related parties	Amortized cost

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EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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Financial liabilities Classification
Accounts payable and accrued liabilities Amortized cost
Due to related parties Amortized cost
Lease liability Amortized cost
Warrant liability FVTPL
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Measurement

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 transaction costs are expensed in the Consolidated Statements of Comprehensive Income. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the Consolidated Statements of Comprehensive Income in the period in which they arise.

Impairment of financial assets

The Company recognizes 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 has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to twelve month expected credit losses. The Company shall recognize in the Consolidated Statements of Comprehensive Income, 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.

b) Fair values

Financial instruments of the Company carried on the Consolidated Statements of Financial Position are carried at amortized cost with the exception of marketable securities and warrant liabilities, which are carried at fair value. There are no significant differences between the carrying value of these financial instruments carried at amortized cost and their estimated fair values as at September 30, 2021 and 2020 due to the short term nature of the instruments.

Financial instruments recorded at fair value on the Consolidated Statements of Financial Position are classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The levels in the hierarchy are:

• Level 1 – quoted prices in active markets for identical financial instruments.

• Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

• Level 3 – valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The Company’s marketable securities were considered to be classified as Level 1 and warrant liabilities were classified as Level 3. There have been no changes between levels during the year.

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EMGOLD MINING CORPORATION For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

c) Market risk

Market risk is the risk that changes in market prices will affect the Company’s earnings or the value of its financial instruments. Market risk is comprised of commodity price risk and interest rate risk. The objective of market risk management is to manage and control exposures within acceptable limits, while maximizing returns. The Company‘s marketable securities is exposed to market risk in trading its investments and unfavourable market conditions could result in dispositions of investments at less than favourable prices.

d) Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its bank accounts and share subscription receivable (Note 6). The Company’s bank accounts are held with major banks in Canada, accordingly the Company believes it is not exposed to significant credit risk. Share subscription receivable was owed by subscribers to the Company’s private placements. Credit risk related to share subscription receivable was assessed as low.

e) Interest rate risk

Interest rate risk is the risk of losses that arise as a result of changes in contracted interest rates. The Company is nominally exposed to interest rate risk.

f) Foreign exchange risk

The functional currency of the Company and its subsidiaries is US dollar. Most of the foreign exchange risk is related to Canadian dollar denominated financial instruments held by the Company.

The Company does not hedge its exposure to currency fluctuations. To manage this risk, the Company maintains only the budget amount of foreign cash required to fund its near-term exploration expenditures.

The US dollars equivalent balances denominated in Canadian dollars at September 30, 2021 and December 31, 2020 are as follows:

are as follows:
Rounded(000’s)	September 30, 2021	December 31, 2020
Cash	$ 397,000	$ 1,114,000
Marketable securities	376,000	729,000
Accounts receivable excludes sales taxes receivable	129,000	139,000
Due from related parties	6,000	6,000
Accounts payable and accrued liabilities	(73,000)	(281,000)
Due to related parties	(32,000)	–
Lease liability	(37,000)	(7,000)
Warrant liabilities	(982,000)	(1,987,000)
	$(216,000)	$(287,000)

Based on the net exposure at September 30, 2021 and 2020, a 5% depreciation or appreciation in Canadian dollar against US dollar would result in a gain or loss of $14,000.

g) Commodity price risk

Commodity price risk is the risk that the fair value of future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for minerals are impacted by world economic events that dictate the levels of supply and demand as well as the relationship between the Canadian and United States dollar, as outlined above. As the Company has not yet

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EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

developed commercial mineral interests, it is not exposed to commodity price risk at this time.

5. Accounts receivable

The Company’s receivables arise from other receivable and goods and services tax from government taxation authority as follows:

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September 30, 2021 December 31, 2020
Goods and services tax $ 9,603 $ 75,904
Share subscription receivable – 67,743
Other receivable 120,021 4,756
$ 129,624 $ 148,403
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6. Marketable securities

As at September 30, 2021, the fair value of its current holdings was $368,790 (December 31, 2020 - $763,437) and the unfavorable change of fair value adjustment of $321,409 for the nine months period ended September 30, 2021 (September 30, 2020 – favorable change of fair value adjustment of $255,226).

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EMGOLD MINING CORPORATION

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated

7. Exploration and evaluation assets

					New York	New York										Buckskin		Buckskin
Property acquisition						Canyon,		Troilus		BC		Mindora,		Golden	Rawhide -			Rawhide -		Koegel
costs	Casa	South, QC		East West, QC		NV	North, QC		Claims			NV		Arrow, NV		East, NV		West, NV	Rawhide, NV			Total
Balance as at
January 1, 2020	$	501,124	$	57,746	$	283,957	$	56,440	$	–	$	50,000	$	587,870	$	304,052	$	140,029	$	140,030	$	2,121,250
Acquisition Costs		26,111		344,811		–		–		–		95,000		–		–		–		–		465,922
(Royalty payment
received)		–		–		–		–		–		–		–		(10,000)		–		–		(10,000)
(Option payment
received)		–		–		(25,000)		–		–		–		–		–		–		–		(25,000)
Balance as at
September 30, 2020	$	527,235	$	402,557	$	258,957	$	56,440	$	–	$	145,000	$	587,870	$	294,052	$	140,029	$	140,030	$	2,552,172
Balance as at
January 1, 2021	$	527,235	$	402,557	$	258,957	$	56,440	$	–	$	145,307	$	637,870	$	294,052	$	140,029	$	140,030	$	2,602,477
Acquisition Costs		–		229,987		–		–		–		45,000		–		–		–		–		274,987
(Royalty payment
received)		–		–		–		–		–		–		–		(10,000)		–		–		(10,000)
Balance as at
September 30, 2021	$	527,235	$	632,544	$	258,957	$	56,440	$	–	$	190,307	$	637,870	$	284,052	$	140,029	$	140,030	$	2,867,464

11 | P a g e

EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

==> picture [680 x 270] intentionally omitted <==

----- Start of picture text -----

Buckskin Buckskin Koegel
Exploration & Evaluation Casa South, East West, New York Troilus North, Other Golden Rawhide - Rawhide - Rawhide,
Expenditure QC QC Canyon, NV QC Prospects Mindora, NV Arrow, NV East, NV West, NV NV Total
Balance as at
January 1, 2020 $ 648,947 $ 3,768 $ 87,365 $ 339,144 $ 206,726 $ 13,416 $ 399,510 $ 3,935 $ 13,476 $ 11,962 $ 1,728,249
Claims Fee 2,827 498 1,251 – – 19,822 63,213 – 3,729 6,384 97,724
Carrying Costs – – – – – – 128,662 – – – 128,662
General property search 3,330 19,941 14,409 – 2,058 19,090 – 2,230 1,515 2,815 65,388
Balance as at
September 30, 2020 $ 655,104 $ 24,207 $ 103,025 $ 339,144 $ 208,784 $ 52,328 $ 591,385 $ 6,165 $ 18,720 $ 21,161 $ 2,020,023
Balance as at
January 31, 2021 $ 899,811 $ 35,956 $ 103,645 $ 339,249 $ 209,404 $ 100,863 $ 731,939 $ 6,165 $ 18,720 $ 22,621 $ 2,468,373
Claims Fee 3,155 3,281 – – 244 57,963 88,112 – 3,774 6,429 162,958
Carrying Costs – – – – – – 108,000 – – – 108,000
General property search – 260 7,186 – 2,925 150,010 372,198 – – 15,747 548,326
Balance as at
September 30, 2021 $ 902,966 $ 39,497 $ 110,831 $ 339,249 $ 212,573 $ 308,836 $1,300,249 $ 6,165 $ 22,494 $ 44,797 $ 3,287,657
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EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

a) Golden Arrow Property, Nevada

The Company has a 100% interest in the Golden Arrow Property, an advanced stage exploration property, totaling 494 unpatented lode mining claims and 17 patented lode mining claims totaling about 10,000 acres. A total of 309 unpatented mining claims are owned and a total of 185 unpatented mining claims are leased.

On October 9, 2018, Emgold completed the acquisition of the 51% interest in the property and also exercised its option to earn 100% interest after completing the $100,000 in aggregate cash payments and issuing Nevada Sunrise a total of 5.0 million common shares of Emgold.

Six unpatented claims are subject to and advance royalty payment of $25,000 per year and a 3% NSR upon production (2% can be purchased for $200,000). 351 unpatented mining claims are subject to a $25,000 per year advance royalty payment and a 3% NSR upon production, of which 1% can be purchased for $1 million. Seventeen patented mining claims are subject to a 1% NSR.

b) Casa South Property, Quebec

The Company has a 100% interest in the Casa South Property, an early-stage exploration property consisting of 204 mining titles covering a total of 11,400 hectares. It is adjacent to Hecla Mining Corporation’s (NYSE: HL) operating Casa Berardi Mine.

On March 20, 2019, the Company closed the acquisition of the option to acquire up to a 91% interest in the property by obtaining final Exchange approval, by completing the first option payment of CDN$75,000 to the Vendors, and by making the share payment required under the Amended Assignment Agreement to the finder.

The Company issued 807,692 common shares for settling CDN$52,500 finder’s fee related to the acquisition of the mineral claims of Casa South, Quebec (see note 11(b)).

On June 13, 2019, Emgold announced it had amended the option agreement to allow it to acquire a 100% interest in the property. On July 29, 2019, the Company issued 4,000,000 units to the vendors of Casa South Property, Quebec whereby each unit consists of one common share and one-half share purchase warrant exercisable at CDN$0.25/unit with a 2-year expiry term (see note 11(b)).

On February 5, 2020, Emgold announced that it expanded the property with the addition of 24 mineral claims totaling approximately 1,320 ha (3,260 ac) bringing the total of the property consisting of 204 claims for payments totaling $26,111.

The property is subject to a 1.5% NSR, of which 0.5% can be purchased by Emgold for CDN$500,000.

c) New York Canyon Property, Nevada

On July 8, 2019, the Company completed a Claim Purchase Agreement with Searchlight Resources Inc. (TSXV: SCLT) giving it the option to acquire a 100% interest the New York Canyon Property, subject to underlying royalties. The property included 21 patented mineral claims and 60 unpatented mining claims totalling about 1,500 acres. Sixty unpatented claims are subject to a 2% NSR, 1% which can be purchased for $1 million. Eighteen patented claims are subject to a 1.75% NSR royalty capped at $2 million and a $0.50 per metric tonne royalty for decorative stone shipped or sold from the property capped at $0.5 million. The Company completed the CDN$50,000 in payment due at closing of the transaction and issued 2,941,176 common shares to Searchlight Resources Inc.

On November 15, 2019, the Company staked 92 additional claims, expanding the size of the property to 152 unpatented and 21 patented mineral claims.

As at December 31, 2019, the remaining commitment for completing the 100% interest acquisition included three payments of C$100,000 each due to Searchlight. Pursuant to the Claim Purchase Agreement, the Company had the

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EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

option of accelerating the acquisition. If the outstanding payments (3 x CDN$100,000) were made on or before the 6- month anniversary of the closing of the Transaction, the Company would be entitled to a 25% discount on the outstanding balance, reducing the amount of the payment due to CDN$225,000.

Kennecott Joint Venture Agreement

On February 7, 2020, the Company signed an Earn-In with Option to Joint Venture Agreement with Kennecott Exploration Company (“Kennecott”), a subsidiary of Rio Tinto PLC (NYSE: RIO) for the New York Canyon Property. Kennecott can earn up to a 75% interest in the Property by completing US$22.5 million in exploration expenditures. Kennecott staked 265 unpatented mineral claims, expanding the Property to 21 patented and 417 unpatented mineral claims, totaling approximately 8,700 acres.

Under the terms of the Earn-In with Option to Joint Venture between the Company and Kennecott:

1. Kennecott will have an option (the “First Option”) to acquire a 55% undivided interest in the Property by incurring $5.0 million in expenditures over a 5-year period, of which $1.0 million is a committed expenditure that must be completed prior to the 18-month anniversary of the Agreement.

2. Kennecott will have a second option (the “Second Option”) to earn an additional 10% undivided interest in the Property (for a total of 65%) by incurring an additional S$7.5 million in expenditures over a 3-year period.

3. Kennecott will have a third option (the “Third Option”) to earn an additional 10% undivided interest in the Property (for a total of 75%) by incurring an additional $10 million in expenditures over a 3-year period.

4. Any expenditure in excess of an option expenditure requirement in a given time period will be credited against subsequent option expenditure requirements. Kennecott may, at any time or from time to time, accelerate its satisfaction of the First, Second, or Third Option by paying the Company money in lieu of incurring expenditures.

5. While earning in, Kennecott will have the right to make exploration and development decisions.

6. Kennecott must maintain the Property in good standing during the option period(s), including payment of BLM and County maintenance fees and make any underlying property payments due to Searchlight.

7. Kennecott will have the right to elect to form a joint venture (the “Joint Venture”) with the Company upon completion of either the First, Second, or Third Option. Upon establishing a Joint Venture each participant will fund the joint venture according to its participating interest, with Kennecott acting as the Manager of the joint venture. If a party’s participating interest falls below 10%, then such parties participating interest will be converted to a 1% Net Smelter Royalty, capped at $25 million.

8. As further consideration for the grant of Options, Kennecott agrees to make a payment of $25,000 to Golden Arrow within forty-five (45) days of executing the Agreement (the “Execution Payment”). The Company has received this payment in 2020.

100% Acquisition from Searchlight

On March 11, 2020, Kennecott paid the remaining option payments of CDN$225,000 on behalf of the Company for the acquisition of 100% interest in New York Canyon Property. The CDN$225,000 payment was part of Kennecott’s $1.0 million committed expenditure required prior to the 18-month anniversary of the Agreement.

d) East West Property, Quebec

On December 6, 2019, Emgold signed a Claim Purchase and Option Agreement giving the Company the option (the “First Option”) to acquire up to a 50% interest in the East-West Property, Quebec (the “Property”) from a private individual (the “Vendor”). The remaining 50% interest in the Property is owned by Knick Exploration Inc. (“Knick”) (TSXV: KNX). Emgold has also acquired a second option (the “Second Option”) to increase its ownership in the Property to 55%.

17 | P a g e

EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The Vendor granted Emgold the First Option to acquire 50% ownership and title to the claims comprising the Property and all rights under pursuant to a sale agreement between the Vendor and Knick dated November 27, 2018, as amended on November 29, 2019 (together, the “Sale Agreement”). In exchange, Emgold agreed to pay the Vendor:

• 4,000,000 common shares in the share capital of Emgold (the “Share Consideration”)(issued to the Vendor on January 3, 2020 the Closing Date);

• CDN$35,000 to be paid to the Vendor upon the three-month anniversary of the Closing Date;

• CDN$50,000 to be paid to the Vendor upon the six-month anniversary of the Closing Date; and

• CDN$50,000 to be paid to the Vendor upon the nine-month anniversary of the Closing Date.

On May 5, 2020, the Company paid CDN$35,000 to the Vendor. On July 9, 2020, Emgold paid the remaining CDN$100,000 to the Vendor, exercised its option to acquire a 50% interest in the claims, and subsequently transferred the 50% interest in the claims from the Vendor into Emgold’s name. The completion of the acquisition of the 50% interest was announced by press release on November 11, 2020.

On September 24, 2021, Emgold completed the acquisition of the remaining 50% interest in the East-West Property from Knick Exploration Inc.. The transaction (the “Transaction”) solidified Emgold’s total interest in the East-West Property at 100%. The Transaction was completed as part of a Commercial Proposal made under the Canadian Bankruptcy and Insolvency Act by Knick with its creditors. The Proposal was agreed to by a vote of creditors on February 23, 2021 and subsequently approved by the Superior Court of Quebec, Abitibi District on April 16, 2021. Emgold paid the Trustee C$160,000 in return for Knick’s interest in the properties. In addition, operations loans totaling C$110,000 advanced to Knick were reclassified as part of the acquisition cost of the East-West Property and Trecesson Properties by Emgold.

e) Trecesson Property, Quebec

On September 24, 2021, Emgold completed the acquisition of 100% interest in the Trecesson Property, Quebec, from Knick Exploration Inc.. The Transaction was completed as part of a Commercial Proposal made under the Canadian Bankruptcy and Insolvency Act by Knick with its creditors. The Proposal was agreed to by a vote of creditors on February 23, 2021 and subsequently approved by the Superior Court of Quebec, Abitibi District on April 16, 2021. Emgold paid the Trustee C$160,000 in return for Knick’s interest in the properties. In addition, operations loans totaling C$110,000 advanced to Knick were reclassified as part of the acquisition cost of the East-West Property and Trecesson Properties by Emgold.

f) Mindora Property, Nevada

On June 15, 2019, Emgold and Nevada Sunrise LLC (“Nevada Sunrise”) entered into a claim purchase agreement for the purchase of 12 unpatented mining claims (“Mindora Claims of Nevada Sunrise”) owned by Nevada Sunrise by Emgold. The payment terms was later amended on December 23, 2019 as follows:

• $25,000 due on or before December 31, 2019 (paid);

• $25,000 due on or before February 29, 2020 (paid); and

• $25,000 per year, for four years, with each payment due on subsequent anniversary dates of the signing date on June 15, 2019 (first and second payment completed)

On June 15, 2019, Emgold and BL Exploration LLC (“BL”) entered into a claim purchase agreement for the purchase of 18 unpatented mining claims (“Mindora Extension Property”) owned by BL by Emgold. The payment terms was later amended on December 23, 2019 as follows:

Emgold would pay BL:

• Cash payment of $50,000 ($25,000 paid in fiscal 2019 and $25,000 paid in fiscal 2020) for the total purchase price upon closing date;

17 | P a g e

EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

• Grant of $20,000 Advance Minimum Royalty (“AMR”) per year and a 2% Net Smelter Royalty (“NSR”) on the Mindora Extension Property; Any AMR shall be credited against future NSR payments. The AMR shall be due on each anniversary of the closing date on June 15, 2019; and Emgold would retain a first option to acquire half of the 2% NSR by making a payment of $200,000 on or before the 5[th] anniversary of the Closing Date. AMR remains at $20,000 per year.

If Emgold does not exercise the first option described above, Emgold would still retain a second option to acquire half of the 2% NSR by making a payment of $500,000 after the 5[th] anniversary and before the 9[th] anniversary of the Closing Date. AMR remains at $20,000 per year;

On December 17, 2020, Emgold announced that it had staked 117 unpatented claims at Mindora, expanding the property size to 147 unpatented claims totaling about 2,940 acres.

g) Buckskin Rawhide East Property, Nevada

The Company has a 100% interest in the 48 unpatented mineral claims, totalling 960 acres, making up Buckskin Rawhide East Property. The claims are inlying claims to Rawhide Mining LLC’s (“RMC”) operating Rawhide Mien.

The Buckskin Rawhide Property is leased to RMC, owners of the Rawhide Mine, under the following terms:

1. The Lease Term is 20 years (start date of 01 June 2013)

2. Advance royalty payments will be $10,000 per year, paid by RMC to Emgold, with the first payment due at signing and subsequent payments due on the anniversary of the Lease Agreement.

3. During the Lease Term, RMC will make all underlying claim fees to keep the claims in good standing.

4. RMC will conduct a minimum of US$250,000 in exploration activities by the end of Year 1.

5. RMC will conduct an additional minimum of US$250,000 in exploration activities by the end of Year 3, for a total of US$500,000 in exploration activities by the end of Year 3.

6. RMC will have the option of earning a 100% interest in the property by bringing it into commercial production.

7. Upon bringing the property into commercial production, RMC will make "Bonus Payments" to Emgold. Bonus Payments will be US$15 per ounce of gold when the price of gold ranges between US$1,200 per ounce and US$1,799 per ounce. If the price of gold exceeds US$1,800 per ounce, the Bonus Payment will increase to US$20 per ounce.

8. After meeting its exploration requirements, should RMC subsequently elect to drop the property of decide not to advance it, the property will be returned to Emgold. Should Emgold subsequently advance the property into production, RMC shall then be entitled to the same type of Bonus Payments as contemplated in 7 above.

Under the terms of the lease agreement, RMC was to complete $500,000 in exploration related expenditures on the property by the third anniversary or June 1, 2016. However, as at June 1, 2016, RMC had completed only US$325,000 in exploration activities on the property.

On June 1, 2016, RMC and Emgold mutually agreed to amend the original Lease Agreement whereby RMC would pay Emgold US$175,000, in seven quarterly payments of US$25,000, starting June 1, 2016, to keep the Lease Agreement in good standing. These payments were in lieu of completing the additional US$175,000 in exploration work required in the original Lease Agreement.

h) Buckskin Rawhide West Property, Nevada

The Company has a 100% interest acquisition in the Buckskin Rawhide West Property. On February 2013, the Company entered a Lease and Option to Purchase Agreement with Jeremy C. Wire to acquire the PC and RH mineral claims, located 0.3 miles west of Emgold’s Buckskin Rawhide Property. Pursuant to the lease agreement, advance royalty payments or equivalent aggregate value in common shares having an equivalent market value were paid/issued to Jeremy C. Cash payment of$5,000 was paid and common shares of $5,000 was issued in 2012. Common shares of

17 | P a g e

EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

$10,000 were issued each year during 2013, and 2014, $20,000 in year 2015, and $30,000 each year in 2016, 2017, and 2018 (total $140,000) completed the acquisition of the property. The property is subject to a 2% Net Smelter Royalty, which can be purchased at any time for $1.0 million.

i) Koegel Rawhide, Nevada

Emgold has a 100% interest in the Koegel Rawhide Property. The property consists of the RHT and GEL claims, 19 unpatented lode mining claims totalling 380 acres, acquired from Jeremy C. Wire. In addition, Emgold staked 17 additional unpatented lode claims totalling 340 acres. In total, the 36 unpatented lode claims totalling 720 acres make up the Property.

j) Troilus North Royalty Interest, Quebec

In December 2018, Troilus Gold acquired the Troilus North property from the Company for CDN$250,000 in cash and 3.75 million Troilus Gold common shares. Two underlying royalties remained on the property (the “Troilus North Royalties”), including a 1% NSR granted to CAT Strategic Metals (formerly Chimata Gold Corporation) (CSE: CAT) (“CAT”).

On December 9, 2019, the Company and CAT completed the assignment agreement whereby CAT assigned its rights in the Troilus North Royalty to the Company for a cash payment of CDN$75,000 (paid). Troilus Gold retains first option to acquire this 0.5% of this royalty for a cash payment of CDN$500,000 and a second option to acquire the remaining 0.5% of this royalty for an additional cash payment of CDN$500,000.

On April 29, 2020, the above assignment transaction was approved by TSX Venture Exchange.

17 | P a g e

EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

8. Related party transactions

Related party transactions and balances not disclosed elsewhere in the consolidated financial statements are as follows:

Name and Principal Position	Period(i)	Remuneration or fees(ii)
	**2021 **	$ 112,500
David Watkinson,CEO and President – salary	2020	$112,500
	2021	$ 36,000
David Watkinson,CEO and President – benefits and allowance	2021	$36,000
	**2021 **	$ –
David Watkinson,CEO and President – Share-based compensation	2020	$52,962
	2021	$ 90,000
Robert Rosner,CFO and director – management fees	2020	$90,000
	**2021 **	$ –
Robert Rosner,CFO and director – Share-based compensation	2020	$33,290
	**2021 **	$ –
Andrew MacRitchie,Director – Director fees	2020	$–
	**2021 **	$ –
Andrew MacRitchie,Director – Share-based compensation	2020	$28,751
	**2021 **	$ –
Vincent Garibaldi,Director – Share-based compensation	2020	$28,751
	**2021 **	$ –
Julien Davy,Director – Share-based compensation	2020	$–
	**2021 **	$ –
Steve Cozine,Corporate Secretary– Consultingfees	2020	$23,150
	2021	$ 28,794
Vanguard Venture owned bySteve Cozine,Corporate Secretary– Consultingfees	2020	$–
	**2021 **	$ –
Steve Cozine,Corporate Secretary– Share-based compensation	2020	$10,592
(i) For the nine months ended September 30, 2021 and 2020.

(ii) Amounts disclosed were paid or accrued to the related party.

The following table reports amounts included in due to (from) related parties.

	September 30, 2021	December 31, 2020
David Watkinson, the CEO	$ 22,066	$ 214,308
Robert Rosner,the CFO	(7,745)	(19,489)
	$ 14,321	$ 194,819

All related party balances are measured at their exchange amount, which is the amount of consideration established and agreed to by the related parties. Amounts due to related parties are unsecured, non-interest bearing and due on demand.

19 | P a g e

EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

9. Share capital

a) Authorized

Unlimited - Number of common shares without par value. Unlimited - Number of preference shares without par value.

b) Common shares, issued and fully paid

- During the nine month period ended September 30, 2021:

On March 15, 2021, the Company returned 349,995 common shares to the treasury due to the non-payment of private placement subscription on September 18, 2020.

On July 16, 2021, the Company issued 10,000,000 flow-through units at CDN$0.08/unit for gross proceeds of CDN$800,000 including 10,000,000 common shares and 5,000,000 warrants exercisable at CDN$0.10 per share with an expiry date on July 16, 2023.

On August 10, 2021, the Company issued 500,000 flow-through units at CDN$0.08/unit for gross proceeds of CDN$40,000 including 500,000 common shares and 250,000 warrants exercisable at CDN$0.10 per share with an expiry date on August 10, 2023.

• During the nine month period September 30, 2020:

On January 3, 2020, the Company issued 4,000,000 common shares for acquiring 50% of mineral claims of East West Property, Quebec (See note 8(b)).

On January 13, 2020, the Company issued 250,000 common shares to Scharfe Holdings Inc. in exchange for the consulting service in the amount of $17,500.

On July 30, 2020, the Company completed a non-flow-through private placement with an issuance of 33.334,570 units at CDN$0.06/unit. Each unit consists of one common share and one share purchase warrants exercisable at CDN$0.08/unit with a 2-year expiry term. In addition, finders fees of CDN$115,715 were paid in cash and 1,954,563 share purchase warrants were issued to finders of this financing.

On September 18, 2020, the Company completed a flow-through private placement with an issuance of 10,410,000 units at CDN$0.10/unit. Each unit consists of one common share and one-half share purchase warrant exercisable at CDN$0.16/unit with a 2-year expiry term. In addition, finders fees of CDN$66,860 were paid in cash and 628,600 share purchase warrants were issued to finders of this financing.

On September 18, 2020, the Company completed a non-flow-through private placement with an issuance of 15,411,540 units at CDN$0.09/unit. Each unit consists of one common share and one-half share purchase warrant exercisable at CDN$0.12/unit with a 2-year expiry term. In addition, finders fees of CDN$27,860 were paid in cash and 288,555 share purchase warrants were issued to finders of this financing.

c) Stock options

The Company has a rolling stock option plan for its directors and employees to acquire common shares of the Company at a price determined by the fair market value of the shares at the date of grant. The maximum aggregate number of common shares reserved for issuance pursuant to the plan is 10% of the issued and outstanding common shares.

Stock option activities during the nine-month periods ended September 30, 2021 and 2020 are summarized as follows:

19 | P a g e

EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

STOCK OPTION ACTIVITY	September 30, 2021 Weighted average exercise price	September 30, 2020	Weighted average exercise price
	(CDN$)		(CDN$)
Options Outstanding and
Exercisable
Balance – beginning of year	12,575,000 $ 0.11	3,625,000	$ 0.16
Granted	- -	3,000,000	0.09
Balance – end ofperiod	12,575,000 $ 0.11	6,625,000	$ 0.13

Details of stock options outstanding as at September 30, 2021 are as follows:

==> picture [475 x 105] intentionally omitted <==

----- Start of picture text -----

Exercise Price
Expiry Date September 30, 2021
(CDN$)
November 19, 2023 $0.15 2,600,000
May 17, 2024 $0.20 1,025,000
January 30, 2025 $0.09 3,000,000
November 30, 2025 $0.09 5,950,000
12,575,000
----- End of picture text -----

19 | P a g e

EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

d) Warrants

Share purchase warrants activity during the nine-month periods ended September 30, 2021 and 2020 are summarized as follows:

==> picture [485 x 352] intentionally omitted <==

----- Start of picture text -----

Weighted
Weighted average
SHARE PURCHASE WARRANT September 30, 2021 September 30, 2020 average exercise
exercise price
ACTIVITY price
(CDN$) (CDN$)
Warrants Outstanding and
Exercisable
Balance – beginning of year 71,677,013 $ 0.11 28,485,233 $ 0.18
Granted 6,000,000 – 56,822,828 0.10
Cancelled (349,995) 0.12 – –
Expired/Forfeited (2,230,800) 0.24 (9,778,873) 0.25
Balance – end of period 75,096,218 0.11 75,529,188 $ 0.04
Details of share purchase warrants outstanding as at September 30, 2021 are as follows:
Exercise Price
Expiry Date September 30, 2021 December-31-20
(CDN$)
August 10, 2023 $0.10 250,000 –
July 16, 2022 $0.10 5,750,000 –
July 30, 2022 $0.08 34,939,133 34,939,133
September 18, 2022 $0.16 5,833,600 5,833,600
September 18, 2022 $0.12 15,350,100 15,700,095
December 19, 2022 $0.08 5,066,668 5,066,668
July 17, 2021 $0.25 - 2,000,000
April 26, 2022 $0.17 1,808,817 1,907,617
75,096,218 71,677,013
----- End of picture text -----

Movement related to the warrant liability resulted from the private placement subscribers’ warrants (finders warrants are excluded from derivative liability calculation), for warrants priced in Canadian dollars, is as follows:

WARRANT LIABILITY (WARRANTS PRICED IN	September 30,	2021	September 30,	2020
CANADIAN DOLLARS)	Number of Warrants	Fair Value	Number of Warrants	Fair Value
Balance – beginning of year	66,574,495	$ 2,082,156	25,608,822	$ 443,488
Issued	5,250,000	141,613	53,951,110	2,673,627
Fair value adjustments	–	(1,237,552)	(9,523,129)	(246,554)
Balance – end ofperiod	71,824,495	$ 986,217	70,036,803	$ 2,870,561

During the nine-month period ended September 30, 2021, the Company recorded warrant liability with fair value of $141,613 arisen from new issuance (September 30, 2020 - $2,673,627).

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EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The subscribers’ warrants as at September 30, 2021 were re-valued on the Company’s reporting dates using the BlackScholes option pricing model, with the following assumptions: weighted average risk free rate of 0.12% - 0.53%, volatility factors of 118% - 156% and an expected life of 2 months – 22 months.

A fair value adjustments of warrant liability of $1,237,552 has been recorded for the nine-month period ended September 30, 2021 (September 30, 2020 – $246,554). As at September 30, 2021, the Company had a warrant liability in the amount of $986,217 (December 31, 2020 - $2,082,156).

10. Equipment

	Equipment Computer	Vehicle Total
Cost
Balance, December 31, 2019	$ 24,716 $ 46,520	$ – $ 71,236
Additions	8,669 5,283	40,772 54,724
Balance, September 30, 2020	$ 33,385$ 51,803	$ 40,772$ 125,960
	Equipment Computer	Vehicle Total
Accumulated Amortization
Balance, December 31, 2019	$ 24,716 $ 46,520	$ – $ 71,236
Additions	650 595	3,058 4,303
Balance, September 30, 2020	$ 25,366$ 47,115	$ 3,058$ 75,539
Cost Balance, December 31, 2020 Additions	Equipment Computer $ 58,785 $ 51,802 – –	Vehicle Total $ 43,210 $ 153,797 – –
Balance, September 30, 2021	$ 58,785 $ 51,802 Equipment Computer	$ 43,210 $ 153,797 Vehicle Total
Accumulated Amortization Balance, December 31, 2020 Additions	$ 28,123 $ 47,312 4,599 1,011	$ 4,321 $ 79,756 5,832 11,442
Balance, September 30, 2021	$ 32,722$ 48,323	$ 10,153$ 91,198
	Equipment Computer	Vehicle Total
Net Carrying Amount Balance, September 30, 2020 Balance, September 30, 2021	$ 8,019 $ 4,688 $ 26,063$ 3,479	$ 37,714 $ 50,421 $ 33,057$ 62,599

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EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

11. Flow-through shares premium liability

A summary of the changes in the Company’s flow-through share premium liability was as follows:

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Flow-through Share Premium Liability September 30, 2021 September 30, 2020
Balance - beginning of the year $ 91,633 $ 88,043
Issuance 27,000 –
Foreign exchange 717 (5,808)
Balance - end of the period $ 119,350 $ 82,235
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Summary of renunciations related to the tranches for flow through common share issuances during the nine-month period ended September 30, 2021 are as follows:

During the nine-month period ended September 30, 2021, no expenditures were spent in relation to the flow through common shares issued during the current period ended September 30, 2021, years ended December 31, 2020 and 2019.

Tranche 2 flow through common shares issued on August 10, 2021 for gross proceeds of CDN$ 40,000

As of the September 30, 2021, the gross proceeds of CDN$ 40,000 remained unspent and will be incurred prior to December 31, 2022.

Tranche 1 flow through common shares issued on July 16, 2021 for gross proceeds of CDN$ 800,000

As of the September 30, 2021, the gross proceeds of CDN$ 800,000 remained unspent and will be incurred prior to December 31, 2022.

Tranche 2 Flow through common shares issued on September 18, 2020 for gross proceeds of CDN$ 1,041,000

As of the September 30, 2021, the gross proceeds of CDN$ 1,041,000 remained unspent and will be incurred prior to December 31, 2022.

Tranche 1 flow through common shares issued on May 10, 2019 for gross proceeds of CDN$ 310,500

As of the September 30, 2021, the gross proceeds of CDN$ 242,645 remained unspent and will be incurred prior to December 31, 2021.

Tranche 1 flow through common shares issued on December 17, 2019 for gross proceeds of CDN$ 350,000

As of the September 30, 2021, the gross proceeds of CDN$ 350,000 remained unspent and will be incurred prior to December 31, 2021.

On July 10, 2020, the Department of Finance Canada proposed, by news release, changes to the federal taxation system applicable to junior mining exploration and other flow through share issuers. The proposed changes seek to extend by 12 months the period in which to spend capital obtained by means of such share value due to impacts of Covid-19. On November 6, 2020, Finances Quebec issued an Information Bulletin announcing changes to various tax measures and harmonization with certain federal tax measures. This includes harmonization with the proposed changes by the federal government in the July 10, 2020 news release. It is expected these legislative changes will be in place in the near future.

12. Leases – right of use assets and lease liabilities

2019 Office Lease

The Company leases a corporate office in Vancouver, BC from third parties under lease agreements on November 1, 2019 and the lease expires on October 31, 2022. Refer to Note 2 to audited financial statements for the year ended

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EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019 “Basis of Presentation and Summary of Significant Accounting Policies” for details regarding the 2019 adoption of IFRS 16.

Effective October 1, 2020, the original lease term has been shortened to March 31, 2021. The modification of the lease term resulted in the reduction of the Right-of-use assets by $38,007 (CDN$50,519) and lease liability by $40,962 (CDN$54,447) and resulted in the recognition of a gain of $2,955 (CDN$3,928).

2021 Office Lease

In addition to the old office lease commitment ended March 31, 2021, the Company entered into a 3-year lease agreement for new office space in Vancouver on January 1, 2021. There are arrangements with other companies that share rent and office expense on a cost-recovery basis. The Company recognized the corresponding Right-of-use asset at inception of the lease in the amount of $46,206 (CDN$58,832) related to the 2021 Office Lease in accordance with IFRS 16.

Right-of-use assets

A summary of the changes in the right-of-use assets for the nine months period ended September 30, 2021 is as follow:

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Right-of-use assets
Balance at January 1, 2020 $ 69,604
Addition –
Depreciation (17,615)
Balance at September 30, 2020 $ 51,989
Balance at January 1, 2021 $ 11,986
Addition 45,119
Foreign exchange difference (1,522)
Depreciation (21,954)
Balance at September 30, 2021 $ 33,629
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Lease liabilities

2019 Office Lease

On November 1, 2019, the Company entered into lease agreement which resulted in the lease liability of $72,752 (undiscounted value of $111,600, discount rate used is 15.95%). This liability represents the monthly lease payment from November 1, 2019 to October 31, 2022, the end of the lease term. The lease term was subsequently modified to expire on March 31, 2021.

2021 Office Lease

In addition to the old office lease commitment ended March 31, 2021, the Company entered into a 3-year lease agreement for new office space in Vancouver on January 1, 2021. There are arrangements with other companies that share rent and office expense on a cost-recovery basis. The Company recognized the lease liability at inception of the lease in the amount of $45,119 (CDN$57,448) related to the 2021 Office Lease in accordance with IFRS 16.

A summary of changes in lease liabilities during the nine-month period ended September 30, 2021 and 2020 is as follows:

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EMGOLD MINING CORPORATION

For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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Lease liabilities
Balance at January 1, 2020 $ 47,211
Addition –
Lease payment on principal portion (4,559)
Lease payments on interest portion –
Lease liability accreation expense 5,642
Foreign exchange difference (964)
Balance at September 30, 2020 $ 47,330
Balance at January 1, 2021 $ 7,129
Addition 45,119
Lease payment on principal portion (19,349)
Lease payments on interest portion –
Lease liability accreation expense 4,296
Foreign exchange difference (1,162)
Balance at September 30, 2021 $ 36,033
Current portion $ 15,487
Long term portion $ 20,546
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The following is a schedule of the Company’s future lease payments under lease obligations:

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Future lease payments
2021 $ 4,536
2022 18,749
2023 19,354
Total undiscounted lease payments 42,639
Less: imputed interest (6,606)
Total carry value of lease obligations $ 36,033
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13. Capital disclosures

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition and exploration of mineral properties. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business. The Company defines capital that it manages as share capital.

Management reviews its capital management approach on an on-going basis and believes that this approach is reasonable and appropriate relative to the size of the Company.

The Company is in the business of mineral exploration and has no source of operating revenue. Operations are financed through the issuance of capital stock or liability instruments, or through the sale of property, plant, and equipment. Capital raised is held in cash in an interest-bearing bank account until such time as it is required to pay operating expenses or resource property costs. The Company is not subject to any externally imposed capital restrictions. Its objectives in managing its capital are to safeguard its cash and its ability to continue as a going concern, and to utilize as much of its available capital as possible for exploration activities. The Company’s objectives for managing its capital have not changed from those employed in the latest year-end.

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EMGOLD MINING CORPORATION For the Periods ended September 30, 2021 and 2020 In US Dollars, unless otherwise stated NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

14. Segmented disclosure

The Company operates in one operating segment, which is acquisition, and exploration of mineral properties. The following provides segmented disclosure on the non-current assets:

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SEGMENT DISCLOSURE (ROUNDED TO 000s) Canada United States Total
September-30-21
Long-term Assets
– – –
Advance payments for assets acquisition $ $ $
–
Deposit $ $ 5,000 $ 5,000
Exploration and Evaluation Assets $ 1,216,000 $ 1,651,000 $ 2,867,000
–
Equipment $ $ 63,000 $ 63,000
–
Right-of-use asset $ 34,000 $ $ 34,000
December-31-20
Long-term Assets
–
Advance payments for assets acquisition $ 152,000 $ $ 152,000
Deposit $ 5,000 $ 5,000 $ 10,000
Exploration and Evaluation Assets $ 986,000 $ 1,616,000 $ 2,602,000
–
Equipment $ $ 74,000 $ 74,000
–
Right-of-use asset $ 12,000 $ $ 12,000
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15. Commitment

The Company entered into a 3-year lease agreement for office space in Vancouver on January 1, 2021 (Note 12). There are arrangements with other companies that share rent and office expensed on a cost-recovery basis.

The Company has a commitment related to the prior issuance of flow through common shares. See Note 11 for a discussion of flow through expenditure commitments related to exploration assets.

16. Events after the reporting period

a) New Corporate Secretary

On October 1, 2021, the Company appointed Denise Landsberger as Corporate Secretary for the Company.

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