Engineer Gold Mines Ltd. — Interim / Quarterly Report 2021

Oct 29, 2021

Engineer Gold Mines Ltd.

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FINANCIAL STATEMENTS

For the nine months ended August 31, 2021

(Expressed in Canadian Dollars)

These unaudited condensed interim financial statements of Engineer Gold Mines Ltd. for the nine months ended August 31, 2021 have been prepared by management and approved by the Board of Directors.

These unaudited condensed interim financial statements have not been reviewed by the Company’s external auditors.

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ENGINEER GOLD MINES LTD. STATEMENTS OF FINANCIAL POSITION

AS AT

(Expressed in Canadian Dollars)

	August 31, 2021 November 30, 2020
ASSETS Current Cash Receivables Prepaid expenses Total Current Assets Equipment (Note 4) Reclamation Bonds (Note 5) Exploration and evaluation assets (Note 6) Total Assets	$ 894,555 $ 44,043 10,818 3,726 5,615 102,615 910,988 150,384 171,532 194,742 75,000 75,000 3,653,673 3,316,145 $ 4,811,193 $ 3,736,271
LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES Current Accounts payable (Note 11) Accrued liabilities Mortgage payable – current portion (Note 6) Due to related parties (Note 11) Total Current Liabilities CEBA Loan (Note 12) Mortgage payable (Note 6) Total Liabilities SHAREHOLDERS’ EQUITY Share capital (Note 7) Reserves (Note 7) Deficit Total Equity Total Liabilities and Equity	$ 84,263 $ 123,942 - 12,145 - 100,000 20,384 185,753 104,647 421,840 26,438 24,596 100,000 100,000 231,085 546,436 6,283,278 4,635,854 819,220 759,119 (2,522,390)) (2,205,138) 4,580,108 3,189,835 $ 4,811,193 $ 3,736,271

Nature and continuance of operations (Note 1)

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

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ENGINEER GOLD MINES LTD. STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(Expressed in Canadian Dollars)

xpressed in Canadian Dollars)
	Three months ended August 31, 2021	Three months ended August 31,2020	Nine months ended August 31, 2021	Nine months ended August 31,2020
EXPENSES Amortization (Note 4) Bank charges and interest (Note 12) Filing and transfer agent fees Management fees (Note 11) Office and miscellaneous Professional fees Salaries and wages (Note 11) Stock based compensation Travel, trade shows and promotion OTHER (INCOME) EXPENSE Gain on settlement of accounts payable Gain on government grant (Note 12) Net loss and comprehensive loss for theperiod	$ 11,570 501 7,605 15,000 12,092 141 50,043 - 12,714 (109,666) - (11,649) (121,315)	$ 11,135 8,023 13,740 15,000 14,372 5,313 119,885 208,375 154,633 (550,476) - - (550,476)	$ 33,210 2,420 53,400 45,000 36,361 29,558 128,177 - 15,827 (343,953) 26,701 - (317,252)	$ 33,181 14,122 24,095 45,000 31,495 10,539 168,727 213,125 194,464 (734,748) - - (734,748)
Basic and diluted net lossper common share	$(0.00)	$ (0.01)	$(0.00)	$ (0.02)
Weighted average number of common shares outstanding	94,244,126	55,681,403	75,016,045	42,066,738

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

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ENGINEER GOLD MINES LTD.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Expressed in Canadian Dollars)

(Expressed in Canadian Dollars)
	ShareCapital Share based payment reserve Total Common Shares Amount Share Subscriptions Deficit Shareholders’ Equity
Balance, November 30, 2019 Issue of shares for cash, private placements, net Share issue costs - cash Share subscriptions Shares issued for exercise of warrants Share-based payments Comprehensive loss for theperiod	35,706,725 3,366,101 300,000 269,052 (1,229,026) 2,706,127 24,666,666 1,339,800 - 281,400 - 1,621,200 - (84,160) (84,160) - - (300,000) - - (300,000) 92,800 9,280 - - 9,280 - - - 213,125 - 213,125 - - - - (734,748) (734,748)
Balance,August 31,2020	60,466,191$ 4,631,021$ - $ 763,577 $ (1,963,744) $ 3,430,824
Balance, November 30, 2020 Issue of shares for cash, private placements, net (Note 7) Share issue costs – cash (Note 7) Shares issued for property (Note 6) Comprehensive loss for theperiod	60,586,191 $ 4,635,854 $ - $ 759,119 $ (2,205,138) $ 3,189,835 33,440,000 1,611,899 - 60,101 - 1,672,000 - (84,475) - - - (84,475) 2,000,000 120,000 - - - 120,000 - - - - (317,252) (317,252)
Balance,August 31,2021	96,026,191$ 6,283,278$ - $ 819,220 $ (2,522,390)$ 4,580,108

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

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ENGINEER GOLD MINES LTD. STATEMENTS OF CASH FLOWS

(Expressed in Canadian Dollars)

	Nine months ended August 31, 2021 Nine months ended August 31,2020 $ (317,252)$ (734,748) - 410,365 33,210 33,181 1,842 - (7,092) 44,934 97,000 (359,696) (798) 24,594 (100,000) - (293,090) (581,370) (10,001) (7,500) (25,000) - (243,553) (356,679) (278,554) (364,179) 40,000 1,587,525 1,349,080 0 (300,000) (165,369) 21,909 1,422,156 1,110,989 850,512 165,440 44,043 735 $ 894,555 $ 166,175 $ 9,848 $ 118,138 $ 120,000 $ - $ 60,101 $ 278,200
CASH FLOWS FROM OPERATING ACTIVITIES Net loss for the period Items not affecting cash: Share based payments Amortization Accreation on loan Changes in non-cash working capital items: Receivables Prepaid expenses Accounts payable and accrued liabilities Mortgage payable – current portion Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Equipment Prepaid royalty Exploration and evaluation asset expenditures Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES CEBA loan Issuance of shares, net Subscription receipts Related party loans and advances, net of receivables Net cash provided by financing activities Change in cash during the period Cash, beginning of period Cash,end ofperiod
Supplementary Cash Flow Information: Non-cash Financing And Investing Activities: Exploration and evaluation costs included in accounts payable Fair value of shares issued for exploration and evaluation assets Fair value of agents warrants issued

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

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

1. NATURE AND CONTINUANCE OF OPERATIONS

The Company was incorporated on January 17, 2018 under the laws of the Province of British Columbia, Canada. The Company obtained its initial listing on the TSX-V on June 26, 2018. The Company is an exploration stage junior mining company engaged in the identification, acquisition and exploration of mineral properties. The Company’s head office, principal address and registered records office is located at 804 – 750 West Pender St, Vancouver, British Columbia, Canada V6C 2T7.

The Company’s financial statements have been prepared on a going concern basis, which presumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

The Company is in the process of exploring its exploration and evaluation assets and has not yet determined whether these properties contain reserves that are economically recoverable. The recoverability of the amounts shown for exploration and evaluation assets and related deferred costs is dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of its mineral properties and upon future profitable production.

Several conditions cast doubt on the validity of this assumption. The Company has incurred a loss since inception and has an accumulated deficit of $2,522,390. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. Such adjustments would be material.

The ability of the Company to continue as a going concern and meet its commitments as they become due, including the acquisition and exploration of exploration and evaluation assets, is dependent on the Company’s ability to obtain the necessary financing. Management is planning to raise additional capital to finance operations and acquire mineral properties. The outcome of these matters cannot be predicted at this time. The ability of the Company to continue as a going concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. These material uncertainties may cast significant doubt about the Company’s ability to continue as a going concern.

The outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in a widespread health crisis that has affected economies and financial markets around the world resulting in an economic downturn. This outbreak may also cause staff shortages, reduced customer demand, increased government regulations or interventions, all of which may negatively impact the business, financial condition or results of operations of the Company. The duration and impact of the COVID-19 outbreak is unknown at this time and it is not possible to reliably estimate the length and severity of these developments.

2. BASIS OF PRESENTATION

Statement of Compliance

These financial statements, including comparatives, have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). They have been prepared on a historical cost basis, except for certain financial instruments which are stated at their fair value. In addition, these financial statements have been prepared using the accrual basis of accounting except for cash flow information. These financial statements are presented in Canadian dollars unless otherwise noted.

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

2. BASIS OF PRESENTATION (continued)

Approval of the financial statements

The financial statements of the Company for the period ended August 31, 2021 were reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors on October 28, 2021.

Critical Accounting Estimates and Judgments

The preparation of these financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported expenses during the period. Actual results could differ from these estimates.

Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period, that could result in a material adjustment to the carrying amounts of assets and liabilities in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

• i) The carrying value and the recoverability of exploration and evaluation assets, which are included in the statements of financial position. The cost model is utilized and the value of the exploration and evaluation assets is based on the expenditures incurred. At every reporting period, management assesses the potential impairment which involves assessing whether or not facts or circumstances exist that suggest the carrying amount exceeds the recoverable amount.

• ii) The recognition of deferred tax assets. The Company considers whether the realization of deferred tax assets is probable in determining whether or not to recognize these deferred tax assets.

• iii) The recorded value of provisions. This amount represents a best estimate of the probable amount payable taking into account available evidence including past history of payments and uncertainty of outflow of future resources.

3. SIGNIFICANT ACCOUNTING POLICIES

Equipment

Equipment is recorded at cost less accumulated amortization, with amortization calculated on a declining balance basis at the following annual rates:

Field equipment 20% Mobile equipment 30% Leasehold improvements 10 years

Equipment that is withdrawn from use, or has no reasonable prospect of being recovered through use or sale, are identified and written off. The assets’ residual values, amortization methods and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Subsequent expenditures relating to items of equipment is capitalized when it is probable that future economic benefits from the use of the assets will be increased. All other subsequent expenditure is recognized as repairs and maintenance.

Exploration and evaluation assets

All costs related to the acquisition of exploration and evaluation assets are capitalized on a property by property basis, net of recoveries. If economically recoverable ore reserves are developed, capitalized costs of the related property are classified as mining assets and amortized using the unit-of-production method. When a property is abandoned, all related costs are written off to operations.

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Exploration and evaluation assets (continued)

The amounts shown for acquisition costs represent costs incurred to date and do not necessarily reflect present or future values. These costs are depleted over the useful lives of the properties upon commencement of commercial production or written off if the properties are abandoned or the claims allowed to lapse.

From time to time, the Company may acquire or dispose of an exploration and evaluation asset pursuant to the terms of an option agreement. As the options are exercisable entirely at the discretion of the optionee, the amounts payable or receivable are not recorded. Option payments are recorded as property costs or recoveries when the payments are made or received. Proceeds received on the sale of an option of the Company’s property are recorded as a reduction of the mineral property cost. The Company recognizes amounts received in excess of the carrying amount in profit or loss.

Although the Company has taken steps to verify the title to exploration and evaluation assets in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements or transfers and title may be affected by undetected defects.

Evaluation and exploration assets are assessed for impairment by management when facts and circumstances suggest that the carrying amount exceeds the recoverable amount. When there is little prospect of further work on a property being carried out by the Company or its partners, when a property is abandoned, or when the capitalized costs are no longer considered recoverable, the related property costs are written down to management’s estimate of their net recoverable amount.

The recoverability of the carrying amount of exploration and evaluation assets is dependent on successful development and commercial exploitation or alternatively the sale of the respective areas of interest.

Decommissioning liabilities

An obligation to incur decommissioning and site rehabilitation costs occurs when environmental disturbance is caused by exploration, evaluation, development or ongoing production.

Decommissioning and site rehabilitation costs arising from the installation of plant and other site preparation work, discounted to their net present value, are provided when the obligation to incur such costs arises and are capitalized into the cost of the related asset. These costs are charged against operations through depreciation of the asset and unwinding of the discount on the provision.

Depreciation is included in operating costs while the unwinding of the discount is included as a financing cost. Changes in the measurement of a liability relating to the decommissioning or site rehabilitation of plant and other site preparation work are added to, or deducted from, the cost of the related asset.

The costs for the restoration of site damage, which arises during production, are provided at their net present values and charged against operations as extraction progresses.

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Changes in the measurement of a liability, which arises during production, are charged against profit or loss. The discount rate used to measure the net present value of the obligations is the pre-tax rate that reflects the current market assessment of the time value of money and the risks specific to the obligation.

Impairment of tangible assets

The Company’s tangible and intangible assets are reviewed for indications of impairment at each statement of financial position date. If indication of impairment exists, the asset’s recoverable amount is estimated.

An impairment loss is recognized when the carrying amount of an asset, or its cash-generating unit, exceeds its recoverable amount. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Impairment losses are recognized in profit or loss.

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

Loss per share

Basic loss per share is calculated using the weighted average number of common shares outstanding during the period. The Company computes the dilutive effect of options, warrants and similar instruments. Under this method, the dilutive effect on earnings per share is calculated presuming the exercise of outstanding options, warrants and similar instruments. It assumes that the proceeds of such exercise would be used to purchase common shares at the average market price during the period. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive.

Share-based payments

The Company grants options to acquire common shares of the Company to directors, officers, employees and consultants. The fair value of share-based payments to employees is measured at grant date, using the Black-Scholes Option Pricing Model, and is recognized over the vesting period for employees using the graded vesting method. Fair value of share-based payments for non-employees is recognized and measured at the date the goods or services are received based on the fair value of the goods or services received. If it is determined that the fair value of goods and services received cannot be reliably measured the share-based payment is measured at the fair value of the equity instruments issued using the Black-Scholes Option Pricing Model.

For both employees and non-employees, the fair value of share-based payments is recognized as an expense with a corresponding increase in reserves. The amount recognized as expense is adjusted to reflect the number of share options expected to vest. Consideration received on the exercise of stock options is recorded in share capital and the related share-based payment in reserves is transferred to share capital.

Income taxes

Income tax expense consisting of current and deferred tax expense is recognized in profit or loss. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end, adjusted for amendments to tax payable with regard to previous years.

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Deferred tax assets and liabilities and the related deferred tax expense or recovery are recognized for deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in profit or loss the period that substantive enactment occurs.

A deferred tax asset is recognized to the extent that it is probable that future taxable income will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Flow-through shares

On the issuance of flow-through shares, any premium received in excess of the closing market price of the Company’s common shares is initially recorded as a flow-through premium liability and included as a liability. Upon related expenditures being incurred, the Company proportionately derecognizes the liability and recognizes the offsetting amount in profit or loss.

Financial instruments

The following is the Company’s accounting policy for financial instruments under IFRS 9:

(i) Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL.

For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.

The following table shows the Company’s classification of financial assets and liabilities under IFRS 9:

Financial asset / liability	Classification under IFRS 9
Cash	FVTPL
Receivables	Amortized cost
Accounts payables	Amortized cost
Due to related parties	Amortized cost
Loan	Amortized cost
Mortgage payable	Amortized cost

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial instruments (continued)

(ii) 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 statements of loss and comprehensive loss. 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 statements of loss and comprehensive loss in the period in which they arise.

Debt investments at FVTOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in Other Comprehensive Income (“OCI”). On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss

Equity investments at FVTOCI

These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.

(iii) Impairment of financial assets at amortized cost

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 the twelve month expected credit losses. The Company shall recognize in the statements of loss and comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

(iv) Derecognition

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity.

Financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Newly adopted accounting pronouncements

The Company adopted IFRS 16 on December 1, 2019. IFRS 16 replaced IAS 17 Leases. IFRS 16 specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. The adoption of this standard had no impact on the Company’s financial instruments as the Company does not have any leases.

New or revised accounting standards not yet adopted

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company’s financial statements.

4. EQUIPMENT

		Leasehold		Mobile		Field
Cost		Improvements		Equipment		Equipment		Total
Balance at November 30, 2019	$	-	$	122,530	$	117,135	$	239,665
Additions		14,000		-		50,000		64,000
Balance at November 30, 2020		14,000	$	122,530	$	167,135	$	303,665
Additions		-		10,001		-		10,001
Balance at August 31, 2021	$	14,000	$	132,531	$	167,135	$	313,666
Accumulated amortization
Balance at November 30, 2019	$	-	$	42,656	$	16,474	$	59,130
Amortization		700		23,962		25,132		49,794
Balance at November 30, 2020		700	$	66,618	$	41,606	$	108,924
Amortization		1,050		13,331		18,829		33,210
Balance at August 31, 2021	$	1,750	$	79,949	$	60,435	$	142,134
Net book value
Balance at November 30,2020	$	13,300	$	55,913	$	125,529	$	194,742
Balance at August 31, 2021	$	12,250	$	**52,582 **	$	106,700	$	171,532

5. RECLAMATION BONDS

The Company has reclamation bonds held in trust by the Ministry of Energy and Mines, British Columbia. As at August 31, 2021, the reclamation bonds consisted of three deposits of $50,000, $5,000, and $20,000 made by the Company for indemnification of site restoration of the Company’s Tagish Lake/Wann River and Atlin properties (Note 6).

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

6. EXPLORATION AND EVALUATION ASSETS

Realization of assets

The investment in mineral properties comprise a significant portion of the Company’s assets. Realization of the Company’s investment in these assets is dependent upon the establishment of legal ownership, the attainment of successful production from the properties or from the proceeds of their disposal.

Resource exploration and development is highly speculative and involves inherent risks. While the rewards if an ore body is discovered can be substantial, few properties that are explored are ultimately developed into producing mines. There can be no assurance that current exploration programs will result in the discovery of economically viable quantities of ore.

Environmental

The Company is subject to the laws and regulations relating to environmental matters in all jurisdictions in which it operates, including provisions relating to property reclamation, discharge of hazardous material and other matters. The Company may also be held liable should environmental problems be discovered that were caused by former owners and operators of its properties and properties in which it has previously had an interest. The Company conducts its mineral exploration activities in compliance with applicable environmental protection legislation. The Company is not aware of any existing environmental problems related to any of its current or former properties that may result in material liability to the Company.

Environmental legislation is becoming increasingly stringent and costs and expenses of regulatory compliance are increasing. The impact of new and future environmental legislation on the Company’s operations may cause additional expenses and restrictions.

If the restrictions adversely affect the scope of exploration and development on the mineral properties, the potential for production on the properties may be diminished or negated.

Exploration and evaluation asset costs and activity is as follows:

	Engineer
Acquisition, beginning of period	$ 1,546,464
Additions	320,000
	1,866,464
Prepaid Royalty, beginning of period	-
Additions	25,000
	25,000
Property exploration expenditures
Balance, beginning of period	1,769,681
Assay	38
Camp	7,805
Equipment	10,539
Environmental	12,151
Geological	59,643
Reporting	6,858
Exploration Tax Credit	(104,506)
	1,762,209
August 31, 2021	$ 3,653,673

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

6. EXPLORATION AND EVALUATION ASSETS (continued)

	Engineer
Acquisition, November 30, 2019	$ 1,286,353
Additions	260,111
Acquisition,November 30,2020	1,546,464
Property exploration expenditures
Balance, beginning of year	1,489,133
Assay	43,267
Camp	131,476
Dewatering	1,695
Drilling	6,800
Equipment	48,216
Geological	284,162
Reporting	6,912
Exploration Tax Credit	(241,980)
	1,769,681
November 30,2020	$3,316,145

Engineer Project, B.C.

The Engineer Project is made up of claims and crown grants located in the Atlin Mining Division of British Columbia. The project includes multiple project areas referred to as Tagish Lake, Wann River, Gold Hill, Atlin and Tag.

In 2017, the Company acquired a 100% interest in the Gold Hill property. The Gold hill property has a 3.0% NSR payable to Guardsman Resources, 1.5% of which can be purchased by the Company for $1,500,000.

Crown grants were acquired in September 2020 with a purchase price of $250,000 plus $12,823 paid for taxes on the property. A mortgage was outstanding for $200,000; $100,000 paid March 31, 2021 and $100,000 due June 30, 2022.

Tag was acquired in February 2021, with the following terms:

Complete:

• a) $200,000 cash: $100,000 - paid July 31, 2020 and $100,000 - paid March 29, 2021; b) 2,000,000 common shares - issued February 25, 2021;

• Outstanding:

• c) $250,000 in advance royalty payments over ten years starting in July 2021, payable in cash or shares;

• d) $500,000 payment upon on completion of a Preliminary Economic Assessment or Feasibility Study that includes mineral resources located within the Property; and

• e) A 1.0% Net Smelter Return royalty, which can be purchased by the Company for $1,000,000 in cash.

• f) An underlying Net Smelter Return royalty of 2.5% from a predecessor agreement.

7. SHARE CAPITAL

Authorized: Unlimited number of common shares without par value.

Issued during the period ended August 31, 2021:

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

7. SHARE CAPITAL (continued)

On June 10, 2021, the Company closed a non-brokered private placement of 10,000,000 units at $0.05 per unit for gross proceeds of $500,000. Each unit entitled the holder to receive one common share of the Company and onehalf common share purchase warrant, with each whole warrant exercisable to acquire one common share of the Company at a price of $0.12 per share to June 11, 2024. The Company paid $20,650 in cash commissions and issued 413,000 broker warrants on this tranche. Broker warrants are exercisable at $0.09 to June 11, 2024. The fair value of finders warrants was estimated at $13,216 using the Black-Scholes Pricing model with the following assumptions: i) exercise price per unit of $0.09; ii) expected share price volatility of 100%; iii) risk free interest rate of 0.48%; iv) no dividend yield and v) expected life of 3 years.

On July 22, 2021, the Company closed a non-brokered private placement of 1,450,000 units at $0.05 per unit for gross proceeds of $72,500. Each unit entitled the holder to receive one common share of the Company and one-half common share purchase warrant, with each whole warrant exercisable to acquire one common share of the Company at a price of $0.12 per share to July 23, 2024.

On February 25, 2021, the Company issued 2,000,000 common shares at $0.06 pursuant to the Tag property acquisitions agreement.

On April 20, 2020, the Company closed a non-brokered private placement of 11,740,000 units at $0.05 per unit for gross proceeds of $587,000. Each unit entitled the holder to receive one common share of the Company and onehalf common share purchase warrant, with each whole warrant exercisable to acquire one common share of the Company at a price of $0.12 per share for a period of 36 months. The Company paid $29,750 in cash commissions and issued 595,000 broker warrants on this tranche. Broker warrants are exercisable at $0.09 for a period of 36 months. The fair value of finders warrants was estimated at $24,395 using the Black-Scholes Pricing model with the following assumptions: i) exercise price per unit of $0.09; ii) expected share price volatility of 103%; iii) risk free interest rate of 0.47%; iv) no dividend yield and v) expected life of 3 years.

On May 14, 2020, the Company closed a non-brokered private placement of 10,250,000 units at $0.05 per unit for gross proceeds of $512,500. Each unit entitled the holder to receive one common share of the Company and onehalf common share purchase warrant, with each whole warrant exercisable to acquire one common share of the Company at a price of $0.12 per share for a period of 36 months. The Company paid $34,075 in cash commissions and issued 681,500 broker warrants on this tranche. Broker warrants are exercisable at $0.09 for a period of 36 months. The fair value of finders warrants was estimated at $22,490 using the Black-Scholes Pricing model with the following assumptions: i) exercise price per unit of $0.09; ii) expected share price volatility of 103%; iii) risk free interest rate of 0.52%; iv) no dividend yield and v) expected life of 3 years.

Issued during the year ended November 30, 2020:

On July 23, 2020, the Company closed a non-brokered private placement of 8,333,333 units at $0.06 per unit for gross proceeds of $500,000. Each unit entitled the holder to receive one common share of the Company and onehalf common share purchase warrant, with each whole warrant exercisable to acquire one common share of the Company at a price of $0.12 per share for a period of 30 months. The Company paid $37,360 in cash commissions and issued 622,667 broker units on this tranche. Broker units are exercisable at $0.09 per unit into 622,667 common shares and 311,334 warrants exercisable to acquire one common share of the Company at a price of $0.15 per share for a period of 30 months. The fair value of finder’s units was estimated at $77,833 using the Black-Scholes Option Pricing model with the following assumptions: i) exercise price per unit of $0.09 and per warrant of $0.15; ii) expected share price volatility of 106%; iii) risk free interest rate of 0.275%; iv) no dividend yield, v) expected life of 2.5 years and vi) fully vested on grant.

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

7. SHARE CAPITAL (continued)

On July 15, 2020, the Company closed a non-brokered private placement of 13,333,333 units at $0.06 per unit for gross proceeds of $800,000. Each unit entitled the holder to receive one common share of the Company and onehalf common share purchase warrant, with each whole warrant exercisable to acquire one common share of the Company at a price of $0.12 per share for a period of 30 months. The Company paid $43,600 in cash commissions and issued 726,667 broker units on this tranche. Broker units are exercisable at $0.09 per unit into 726,667 common shares and 363,334 warrants exercisable to acquire one common share of the Company at a price of $0.15 per share for a period of 30 months. The fair value of finders units was estimated at $83,567 using the Black-Scholes Option Pricing model with the following assumptions: i) exercise price per unit of $0.09 and per warrant of $0.15; ii) expected share price volatility of 106%; iii) risk free interest rate of 0.28%; iv) no dividend yield, v) expected life of 2.5 years and vi) fully vested on grant.

On December 18, 2019, the Company closed a non-brokered private placement of 3,000,000 units at $0.10 per unit for gross proceeds of $300,000. Each unit entitled the holder to receive one common share of the Company and one-half common share purchase warrant, with each whole warrant exercisable to acquire one common share of the Company at a price of $0.15 per share for a period of 30 months. A value of $120,000 was charged to share based payment reserve using the residual method on this issuance. The Company paid $8,000 in cash commissions, which was recorded during the year ended November 30, 2019 and issued 80,000 broker units on this tranche. Broker units are exercisable at $0.10 per unit into 80,000 common shares and 40,000 warrants exercisable to acquire one common share of the Company at a price of $0.15 per share for a period of 30 months. The fair value of finders units was estimated at $3,200 using the Black-Scholes Option Pricing model with the following assumptions: i) exercise price per unit of $0.10 and per warrant of $0.15; ii) expected share price volatility of 92%; iii) risk free interest rate of 1.74%; iv) no dividend yield, v) expected life of 2.5 years and vi) fully vested on grant.

Share-based payment reserve

The share-based payment reserve represents the fair value of stock options and finder’s units with embedded warrant until such time that the share-based instruments are exercised, at which time the corresponding amount will be transferred to share capital.

8. STOCK OPTIONS

The Company has a rolling stock option plan (the “plan”) that authorizes the board of directors to grant incentive stock options to directors, officers, consultants and employees, whereby a maximum of 10% of the issued common shares are reserved for issuance under the plan.

A summary of the changes in options follows:

A summaryof the changes in options follows:
	Number of Options Outstanding Weighted Average Exercise Price
Balance, November 30, 2019 Issued Expired/Cancelled Balance, November 30, 2020 Expired/Cancelled	3,340,000 $ 0.12 3,250,000 0.12 (2,190,000) 0.10
	4,400,000 $ 0.13 (250,000) 0.14
Balance,August 31,2021	4,150,000 $0.12

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

8. STOCK OPTIONS (continued)

As at August 31, 2021 the following options were outstanding:

Total Number		Exercise	Expiry
of Options	Price		Date
1,000,000	$	0.15	September 11, 2021
500,000	$	0.10	May 12, 2023
2,650,000	$	0.12	July23, 2023
4,150,000

As at August 31, 2021 the weighted average remaining contractual life of the stock options was 1.42 years and the weighted average exercise price was $0.12 (August 31, 2020 – 2.38 years and $0.13).

On July 24, 2020 the Company granted 2,750,000 incentive stock options to a director exercisable for a period of three years at a price of $0.12 per share. The fair value of the options granted was estimated on the date of grant in the amount of $192,500 using the Black-Scholes Option Pricing model with the following assumptions: i) exercise price per share of $0.12; ii) expected share price volatility of 100%; iii) risk free interest rate of 0.28%; iv) no dividend yield, v) expected life of 3 years and vi) fully vested on grant

On May 13, 2020 the Company granted 500,000 incentive stock options to a director exercisable for a period of three years at a price of $0.10 per share. The fair value of the options granted was estimated on the date of grant in the amount of $15,000 using the Black-Scholes Option Pricing model with the following assumptions: i) exercise price per share of $0.10; ii) expected share price volatility of 100%; iii) risk free interest rate of 0.78%; iv) no dividend yield, v) expected life of 3 years and vi) fully vested on grant.

9. WARRANTS

A summary of the changes in warrants follows:

A summaryof the changes in warrants follows:
	Number of Warrants Outstanding Weighted Average Exercise Price
Balance, November 30, 2019 Issued Exercised Balance, November 30, 2020 Issued	12,436,800 $ 0.15 13,762,668 0.13 (212,800) 0.13
	25,986,668 $ 0.13 18,455,900 0.13
Balance,August 31,2021	44,442,568 $0.13

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

9. WARRANTS (continued)

As at August 31,2021	the	followingsharepurchase warrants were outstanding:	followingsharepurchase warrants were outstanding:
Total Number		Exercise	Expiry
of Warrants		Price	Date
2,836,400	$	0.15	January 4, 2022
348,400	$	0.10	January 4, 2022
1,605,000	$	0.15	February 7, 2022
246,000	$	0.10	February 7, 2022
2,056,600	$	0.15	March 7, 2022
177,600	$	0.10	March 7, 2022
1,050,000	$	0.15	April 2, 2022
150,400	$	0.10	April 2, 2022
1,500,000	$	0.15	June 19, 2022
80,000	$	0.10	June 19, 2022
3,800,000	$	0.15	June 1, 2023
6,666,667	$	0.12	January 16, 2023
726,667	$	0.09	January 16, 2023
4,166,667	$	0.12	January 24, 2023
622,667	$	0.09	January 24, 2023
5,870,000	$	0.12	April 21, 2024
595,000	$	0.09	April 21, 2024
5,125,000	$	0.12	May 15, 2024
681,500	$	0.09	May 15, 2024
5,000,000	$	0.12	June 10, 2024
413,000	$	0.09	June 10, 2024
725,000	$	0.12	July22,2024
44,442,568

As at August 31, 2021 the weighted average remaining contractual life of the share purchase warrants was 1.71 years and the weighted average exercise price was $0.13 (August 31, 2020 – 2.09 years and $0.13).

10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

As at the statement date the fair value of cash held by and for the Company was based on level 1 inputs of the fair value hierarchy.

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

Credit risk

Credit risk is the risk of loss associated with the counterparty’s inability to fulfil its payment obligations. The Company believes it has no significant credit risk. Credit risk on cash is assessed as low. There is nominal risk associated with receivables as this is primarily from a government agency.

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements at any point in time. The Company achieves this by maintaining sufficient cash and seeking equity financing when needed. All the Company’s financial liabilities have contractual maturities less than 30 days and are subject to normal trade terms. The Company is exposed to liquidity risk which has been assessed as high.

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices. The Company is not exposed to market risk as all of the Company’s financial assets and liabilities are denominated in Canadian dollars and there are no debts that would be affected by interest rate changes. As such, market risk has been assessed as low.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in the market interest rates. The Company’s cash is held in an account with a major Canadian financial institution. The funds may be withdrawn at any time without penalty. Given the short-term nature of the Company’s financial instruments, fluctuations in interest rates do not have a significant impact on estimated fair values as at the statement date.

Foreign currency risk

The Company does not have assets or liabilities in a foreign currency and therefore is not exposed to foreign currency risk.

Price risk

The Company is exposed to price risk with respect to equity prices. Equity price risk is defined as the potentially adverse impact on the Company’s ability to obtain equity financing due to movements in individual equity prices or general movements in the level of the stock market. The Company closely monitors individual equity movements and the stock market to determine the appropriate course of action to be taken by the Company.

11. RELATED PARTY TRANSACTIONS

• a) The Company incurred the following expenses charged by key management personnel and companies controlled by key management personnel. Such personnel include the Company’s Directors, Chief Executive Officer, Chief Financial Officer and Corporate Secretary.

		August 31,2021		August 31,2020
Management fees by officer	$	45,000	$	45,000
Administration fee by officer		24,750		16,500
Salaries to officers		46,450		26,750
Total	$	116,200	$	88,250

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ENGINEER GOLD MINES LTD. NOTES TO THE FINANCIAL STATEMENTS NINE MONTHS ENDED AUGUST 31, 2021 (Expressed in Canadian Dollars)

11. RELATED PARTY TRANSACTIONS (continued)

• b) Due to related parties balances consist of the following:

		August 31,2021	November	30,2020
Officers	$	15,125	$	24,444
Major shareholder		4,944		100,722
Companycontrolled bya major shareholder		315		60,587
Total	$	20,384	$	185,753

The amounts due to the related parties have no specific terms of repayment, are unsecured and non-interestbearing. The amount due to a company controlled by a major shareholder is included in accounts payable and accrued liabilities.

• c) The Company was charged $1,661 (August 31, 2020 - $52,273) for various exploration and evaluation expenditures by a company controlled by a major shareholder.

12. CEBA LOANS

The Company received a Canada Emergency Business Account (“CEBA”) interest-free loan of $40,000 of which $20,000 is forgivable if repaid by December 31, 2022. The loans were recorded at fair value using an effective rate of 10%, considering the grant, the interest- free loan and the forgivable portion. The residual value was recorded as other income in the year of issue (2020: $16,743). Effective January 1, 2023, any outstanding balance on the term loan shall bear interest at a rate of 5% per annum. The term loan matures on December 31, 2025.

13. CONTINGENCY

The Company settled a province of British Columbia small claims court claim by a former Director. The Company paid $15,000 in full settlement of the $24,108 claim in April 2021.

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