First Tellurium Corp. — Interim / Quarterly Report 2021

Jun 30, 2021

FIRST TELLURIUM CORP. (Formerly Deer Horn Capital Inc.)

FINANCIAL STATEMENTS

For the nine months ended April 30, 2021 and 2020

(Expressed in Canadian Dollars)

NOTICE TO READER

Pursuant to National Instrument 51-102, Part 4, subsection 4.3(3)(a) issued by the Canadian Securities Administrators, 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 condensed consolidated interim financial statements for the Company for the third quarter ended April 30, 2021 have been prepared for and are the responsibility of the Company’s management.

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

FIRST TELLURIUM CORP. STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars) ( unaudited )

Assets Current Assets Cash Receivables Prepaid expenses Equipment Right-of-use asset Reclamation deposit Exploration and evaluation property Investment in an associated company	Note	Apr. 30, 2021 July31,2020
	3 4 5 6 7 8 9	$ 5,091 $ 120,292 17,985 11,700 21,622 22,549
		44,698 154,541 4,031 4,702 1,202 5,330 85,212 85,212 63,770 - 48,460 43,460
		$ 247,373 $ 293,245
Liabilities Current Liabilities Accounts payable and accrued liabilities Lease liability Loans payable Due to relatedparties	10 6 11 13	$ 71,228 $ 153,757 2,005 5,942 221,700 207,000 312,113 231,544
		607,046 598,243
Shareholders’ Deficiency Share capital Share-based payments reserve Share subscriptions Deficit	12	15,529,514 15,262,754 569,842 545,347 13,840 13,840 (16,472,869) (16,126,939)
		(359,673) (304,998)
		$ 247,373 $ 293,245

Nature of Operations and Going Concern (Note 1) Contingencies (Note 15) Subsequent Events (Note 18)

On behalf of the Board:

“ Tyrone Docherty ” “Tony Fogarassy ” Director Director

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

FIRST TELLURIUM CORP. STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Expressed in Canadian Dollars) ( unaudited ) For the three and nine months ended April 30,

Note	Three months ended April 30, Nine months ended April 30, 2021 2020 2021 2020
Operating Expenses Advertising and promotion Consulting fees Depreciation 5 Exploration and evaluation Expenditures (recovery) Interest expense Investor relations and shareholder information Loss on settlement of debt Management fees 11 Office and miscellaneous Professional fees Regulatory and filing fees Share-based payments Travel	- 57,452 3,570 74,107 15,000 25,000 55,000 55,000 212 39 4,798 123 - - 19,548 - 4,624 4,394 13,873 13,182 3,349 4,075 14,106 12,895 - - 84,086 - 30,000 30,000 90,000 90,000 7,290 6,528 17,481 20,626 7,014 150 11,874 28,071 3,288 7,266 12,976 17,114 - 78,309 17,169 84,282 - - 1,449 -
	(70,777) (213,213) (345,930) (395,400)
Loss and comprehensive loss for the period	$ (70,777) $ (213,213) $ (345,930) $ (395,400)
Basic and diluted loss per share Weighted average shares outstanding	$ - $ (0.01) $ (0.01) $ (0.02) 32,499,676 16,631,364 30,917,832 18,371,204

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

FIRST TELLURIUM CORP. STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIENCY (Expressed in Canadian Dollars)

	Number of
	common			Share		Share-based				Total shareholders’
	shares	Share Capital		Subscriptions		payments reserve		Deficit		deficiency
Balance, July 31, 2019	16,010,931	$ 14,509,125	$	5,250	$	236,264	$	(15,264,936)	$	(514,297)
Private placement	6,650,000	332,500		-		-		-		332,500
Shares for debt	2,182,500	189,125		-		-		-		189,125
Stock options granted	-	-		-		84,282		-		84,282
Residual value of warrants	-	(227,538)		-		227,539		-		-
Loss and comprehensive loss
for the period	-	-		-		-		(395,400)		(395,400)
Balance, April 30, 2020	24,843,431	$ 14,803,212		$ 5,250	$	548,085	$	(15,660,336)	$	(303,789)
Balance, July 31, 2020	28,443,431	$ 15,262,754	**$ **	13,840	$	545,347	$	(16,126,939)	$	(304,998)
Private placement	2,800,000	134,000		-		6,000		-		140,000
Shares for debt	1,000,000	70,000		-		64,086		-		134,086
Reversal of expired warrants	-	62,760		-		(62,760)		-		-
Share based compensation	-	-		-		17,169		-		17,169
Loss and comprehensive loss
for the period	-	-		-		-		(345,930)		(345,930)
Balance, April 30, 2021	32,243,431	$ 15,529,514	$ 13,840		$ 569,842		$	(16,472,869)	$	(359,673)

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

FIRST TELLURIUM CORP. STATEMENTS OF CASH FLOWS (Expressed in Canadian Dollars) ( unaudited ) For the nine months ended April 30,

		2021	2020
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period	$	(345,930)	$ (395,400)
Items not involving cash:
Depreciation		4,798	123
Share-based payments		17,169	84,282
Interest expense		13,873	-
Loss on settlement of debt		84,086	-
Changes in non-cash working capital balances:
Decrease (increase) in receivables		(6,825)	(3,782)
Decrease (increase) in prepaid expenses		927	(9,022)
Increase (decrease) in due to related party		80,569	(71,671)
Increase (decrease) in accounts payable
and accrued liabilities		(82,484)	(25,204)
Cash flows used in operating activities		(233,817)	(420,674)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of share capital		181,212	521,625
Investment in associated company		(5,000)
Right of use asset		(4,128)
Loans received		14,700	-
Acquisition of exploration and evaluation asset		(63,770)	-
Lease payments		(4,398)	-
Cash flows provided from financing activities		118,616	521,625
Increase (decrease) in cash during period		(115,201)	100,951
Cash, beginning of period		120,292	6,212
Cash, end ofperiod	$	5,091	$107,163
Supplemental non-cash investing and financing activities:
Transfer expired warrants to share capital	$	62,760	$ -
Shares issued for debt settlement		50,000	-

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

FIRST TELLURIUM CORP. NOTES TO THE FINANCIAL STATEMENTS For the nine months ended April 30, 2021

NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN

First Tellurium Corp. (“First Tellurium” or the “Company”) (formerly Deer Horn Capital Inc.) was incorporated under the Business Corporations Act (Canada) and continued into British Columbia pursuant to the Business Corporations Act (British Columbia, Canada). The Company’s head office and principal place of business is 381 – 1440 Garden Place, Delta, British Columbia, Canada. The Company is a reporting issuer in the provinces of British Columbia, Alberta and Ontario, Canada and trades on the Canadian Securities Exchange under the symbol “FTEL”. The Company owns interests in exploration and evaluation assets in British Columbia and Colorado, USA and its principal business is the exploration of those assets.

These financial statements are prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business in the foreseeable future. Management believes that the Company’s working capital at April 30, 2021, is not sufficient to finance operations through the next twelve months. The Company has incurred ongoing losses and has a shareholders’ deficiency. The Company’s ability to continue on a going concern basis depends on its ability to successfully raise additional financing. While the Company has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms acceptable to the Company. These material uncertainties may cast significant doubt upon the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The financial statements were authorized by the Board of Directors of the Company on June 29, 2021.

NOTE 2 – BASIS OF PRESENTATION

Statement of compliance

These condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”), on a basis consistent with the accounting policies disclosed in the audited financial statements for the year ended July 31, 2020, except for newly adopted accounting policies as noted below.

These unaudited condensed interim financial statements should be read in conjunction with the most recently issued annual audited financial statements of the Company, which include information necessary or useful to understanding the Company’s business and financial statement presentation. In particular, the Company’s significant accounting policies were presented as Note 3 to the financial statements for the year ended July 31, 2020 and have been consistently applied in the preparation of these unaudited condensed interim financial statements.

NOTE 3 – RECEIVABLES

	As at April 30,	As at July 31,
	2021	2020
Amounts due from the Government of Canada
pursuant to GST input tax credits	$ 17,985	$ 11,700
Total	$ 17,985	$ 11,700

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FIRST TELLURIUM CORP. NOTES TO THE FINANCIAL STATEMENTS For the nine months ended April 30, 2021

NOTE 4 – PREPAID EXPENSES

			As at April 30,	As at April 30,	As at July 31,
				2021	2020
	Prepaid expenses		$	21,622	$ 22,549
	Total		$	21,622	$ 22,549
	NOTE 5 – EQUIPMENT
		Office equipment
	Cost:
	Balance at July 31, 2019				$19,651
	Additions				4,102
	Balance at July 31, 2020				$ 23,753
	and April 30, 2021
	Accumulated depreciation:
	Balance at July 31, 2019				18,788
	Depreciation				263
	Balance at July 31, 2020				19,051
	Depreciation				671
	Balance at April 30, 2021				$19,722
	Carrying amounts:
	July 31, 2020				$ 4,702
	April 30, 2021				$ 4,031

NOTE 6 – RIGHT-OF-USE ASSET AND LEASE LIABILITY

ROU asset	Lease liability
Balance July 31, 2020 $ 5,330 Depreciation expense (4,128) Interest expense - Payments -	$ 5,942 - 460 (4,397)
Balance at April 30, 2021 $1,202	$2,005

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FIRST TELLURIUM CORP. NOTES TO THE FINANCIAL STATEMENTS For the nine months ended April 30, 2021

NOTE 7 – RECLAMATION DEPOSIT

The Company provided funding for deposits as security against potential future reclamation work related to the Deerhorn property (Note 8).

	As	at April 30,	As at July 31,
		2021	2020
Reclamation deposit: Deerhorn property	$	85,212	$ 85,212

NOTE 8 – EXPLORATION AND EVALUATION ASSETS

Deerhorn property

The Company owns a 50% interest in the Deerhorn property, located in north western British Columbia, acquired from a company related by virtue of common directors. It may acquire an additional 25% interest by incurring all costs required to bring the property to commercial production.

Exploration and evaluation expenditures

	As at April 30,	As at April 30,	As at July 31,
	2021		2020
Geological consulting	$ 12,631		$ 10,960
Other		6,917	-
Mining tax credit recovery		-	-
Total exploration expense (recovery)	$	19,548	$ 10,960

Colorado Klondike property

The Company has acquired an option on the Colorado Klondike property, located in south-central Colorado, from Colorado Klondike LLC. The terms of the agreement include consideration for an aggregate US$250,000 cash and the incurrence of an aggregate US$300,000 in exploration expenditures on the property within five years, at which time the option may be fully exercised upon payment of US$1,500,000. Upon full exercise of the option Colorado Klondike LLC will retain a 3% NSR, with the Company reserving the right to buy-back a 1% NSR for consideration of US$1,000,000. The Company will also be required to pay an advance royalty payment of US$60,000 per annum commencing on the first anniversary of the exercise of the option. The Company has paid an initial US$50,000 to the Optionor.

NOTE 9 – INVESTMENT IN ASSOCIATED COMPANIES

The Company has a 49% investment in two private companies, Cheona Metals Inc. and Cheona Health Inc., which are classified as long-term investments. As the Company owns a 49% interest in each entity and maintains significant influence, but not control, the Company accounts tor these investments under the equity method. Cheona Health Inc. has been dormant since incorporation.

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FIRST TELLURIUM CORP. NOTES TO THE FINANCIAL STATEMENTS For the nine months ended April 30, 2021

NOTE 9 – INVESTMENT IN ASSOCIATED COMPANIES (continued)

The following table is a reconciliation of the investment in Cheona Metals Inc.:

Investment in Cheona Metals Inc.

Balance at July 31, 2019	$43,460
Additions	5,000
Share of loss	-
Balance at April 30, 2021	$48,460

The following table summarizes Cheona Metals Inc.’s statement of financial position:

As at July 31, 2020
Current assets	$ 34,509
Current liabilities	(55,000)
Net assets at April 30, 2021	$ (20,491)

NOTE 10 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	As at April 30,	As at July 31,
	2021	2020
Trade payables	$ 42,745	$ 75,882
Other accrued liabilities	30,488	77,875
Total	$ 73,233	$ 153,757

NOTE 11 – LOANS PAYABLE

In fiscal 2016 the Company issued debenture loans in the principal amount of $182,000. The loans bear an annual interest rate of 10% and mature on March 2, 2021. The Company recorded interest expense of $18,155 (2018 - $18,350) in relation to the accrued interest on the debenture loans and is included in accounts payable and accrued liabilities.

In fiscal 2018, the Company made the required interest payments under the loan agreements, however the Company has not received a waiver of the previous breach of terms, accordingly, the loans are presented as current. Interest payments for the further periods remain outstanding. The Company is therefore currently in default for interest payments due.

The Company has also received loans from a third-party in the amount of $39,700. The loan is unsecured, has no fixed terms of repayment and is not interest-bearing.

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FIRST TELLURIUM CORP. NOTES TO THE FINANCIAL STATEMENTS For the nine months ended April 30, 2021

NOTE 12 – SHARE CAPITAL

a) Authorized: An unlimited number of common shares without par value.

b) Share issuance:

Fiscal 2021

On November 6, 2020, the Company completed a debt settlement transaction, issuing 1,000,000 units to settle debt of $50,000. Each unit consisted of one common share and one common share purchase warrant exercisable at $0.10 per share for a period of two years. The common shares were issued with a fair value of $70,000 and the warrants were issued with a fair value of $64,086. The Company recognized a loss of $84,086 on the settlement of debt.

On November 6, 2020, the Company completed the first tranche of a non-brokered private placement, issuing 1,600,000 units at a price of $0.05 per unit for total proceeds of $80,000. Each unit consisted of one common share and one common share purchase warrant exercisable at $ per share for a period of two years. No value was attributed to the warrant portion of the units.

On December 11, 2020, the Company completed the second and final tranche of a non-brokered private placement, issuing 1,200,000 units at a price of $0.05 per unit for total proceeds of $60,000. Each unit consisted of one common share and one common share purchase warrant exercisable at $ per share for a period of two years. A value of $6,000 was attributed to the warrant portion of the units.

Fiscal 2020

On January 10, 2020, completed a debt settlement transaction, issuing 2,182,500 units at a deemed price of $0.05 per unit to retire $108,125 of existing debt payable to consultants, lenders and other creditors, including insiders. Each unit consisted of one common share and one common share purchase warrant exercisable at $0.10 per share for a period of two years.

b) Stock Options

The Company is authorized to grant options to executive officers, directors, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common stock of the Company, on a rolling basis. Options may be granted at an exercise price of no less than a 25% discount of the market price on the date of the grant, or such higher price as determined by the board of directors. Options can be granted for a maximum term of ten years. Vesting may be set on an individual basis as determined by the board of directors.

As at January 31, 2021, all outstanding stock options were vested and exercisable, with a weighted average exercise price of $0.12.

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FIRST TELLURIUM CORP. NOTES TO THE FINANCIAL STATEMENTS For the nine months ended April 30, 2021

NOTE 12 – SHARE CAPITAL (continued)

The continuity for stock options for the period ended April 30, 2021, is as follows:

Number outstanding July 31, 2020 Granted Exercised	Expired/ Cancelled	Number outstanding Apr. 30, 2021 Exercise price per share Expiry date Weighted average remaining contractual life in years
120,000 - - 850,000 - - 100,000 - - 1,050,000 - - - 150,000 -	- - - - -	120,000 $0.25 June 16, 2021 0.14 850,000 $0.14 April 5, 2028 6.94 100,000 $0.05 January 27, 2030 8.46 1,050,000 $0.10 March 6, 2030 8.83 150,000* $0.10 August 6,2030 9.27
2,120,000 - -	-	2,270,000 $0.12 (weighted average) 7.68
$0.12 $0.10 -	-	Exercisable 2,270,000 $0.12 (weighted average) -

*(subsequently expired, unexercised)

The continuity for stock options for the period ended April 30, 2020, is as follows:

Number outstanding July 31, 2019 Granted Exercised	Expired/ Cancelled	Number outstanding April 30, 2020 Exercise price per share Expiry date Weighted average remaining contractual life in years
120,000 - - 850,000 - - - 100,000 - - 1,050,000 -	- - - -	120,000 $0.25 June 16, 2021 1.14 850,000 $0.14 April 5, 2028 7.90 100,000 $0.05 January 27, 2030 9.46 1,050,000 $0.10 March 6,2030 9.83
970,000 1,150,000 -	-	2,120,000 $0.12 (weighted average) 8.55
$0.15 $0.10 -	-	Exercisable 2,120,000 $0.12 (weighted average) 8.55

The fair value of each option granted to employees, officers and directors was estimated on the date of grant using the Black-Scholes option pricing model.

Fiscal 2021

During the period ended January 31, 2021, the Company recorded $17,169 in share based compensation pursuant to options granted.

The fair value of 150,000 options granted on August 6, 2020 with an exercise price of $0.10 was determined using a risk free interest rate of 0.12%, an expected volatility of 177%, an expected life of ten years and an expected dividend rate of zero, resulting in a fair value of $17,169 or $0.11 per option.

Fiscal 2020

During the six-month period ended January 31, 2020, the Company recorded $5,973 in share-based compensation for options granted to a consultant on January 27, 2020.

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FIRST TELLURIUM CORP. NOTES TO THE FINANCIAL STATEMENTS For the nine months ended April 30, 2021

NOTE 12 – SHARE CAPITAL (continued)

c) Share-purchase warrants:

The continuity for share purchase warrants for the period ended April 30, 2021, is as follows:

Number outstanding July 31, 2020 Granted Exercised Expired/ Cancelled Number outstanding April 30, 2021	Exercise price per share	Expiry date	Weighted average remaining contractual life in years
2,182,500 - - - 2,182,500 3,050,000 - - - 3,050,000 1,300,000 - - - 1,300,000 1,600,000 - - - 1,600,000 2,300,000 - - - 2,300,000 2,000,000 - - - 2,000,000 - 1,000,000 - 1,000,000 - 1,600,000 - 1,600,000 - 1,200,000 - 1,200,000 100,000 - - 100,000 - 100,000 - - 100,000 - 41,000 - - 41,000 -	$0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 - - -	January 27, 2022 March 13, 2022 February 26, 2022 February 19, 2022 February 19, 2022 June 1, 2022 November 6, 2022 November 6, 2022 December 11, 2022 August 3, 2020 August 13, 2020 August 29, 2020	0.75 0.87 0.83 0.81 0.81 1.09 1.59 1.59 1.62 - - -
12,673,500 3,800,000 - (241,000) 16,232,500	$0.10	(weighted average)	0.99
$0.29 $0.10 - - Exercisable 16,232,500	-	-	$0.10

The fair value of 2,182,500 compensatory warrants granted on December 11, 2020 with an exercise price of $0.10 was determined using a risk free rate of 0.02%, an expected volatility of 255%, an expected life of two years, and an expected dividend rate of zero, resulting in a fair value of $64,086.

The continuity for share purchase warrants for the period ended April 30, 2020, is as follows:

Number outstanding July 31, 2019 Granted Exercised Expired/ Cancelled Number outstanding April 30, 2020 Exercise price per share	Expiry date Weighted average remaining contractual life in years
- 3,050,000 - - 3,050,000 $0.10 - 1,300,000 - - 1,300,000 $0.10 - 1,600,000 - - 1,600,000 $0.10 - 2,300,000 - - 2,300,000 $0.10 - 2,182,500 - - 2,182,500 $0.10 100,000 - - - 100,000 $0.60 100,000 - - - 100,000 $0.60 41,000 - - - 41,000 $0.60 400,000 - - (400,000) - - 1,640,000 - - (1,640,000) - -	March 13, 2022 1.87 February 26, 2022 1.83 February 19, 2022 1.81 February 19, 2022 1.81 January 27, 2022 1.71 August 3, 2020 0.28 August 13, 2020 0.28 August 29, 2020 0.33 November 15, 2019 - December 10, 2019 -
2,281,000 10,432,500 - (2,040,000) 10,673,500 -	(weighted average) 1.74
$0.29 $0.10 - $0.25 Exercisable 10,673,500 $0.11	- $0.11

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FIRST TELLURIUM CORP. NOTES TO THE FINANCIAL STATEMENTS For the nine months ended April 30, 2021

NOTE 13 – RELATED PARTY TRANSACTIONS

• a) The Company’s related parties consist of companies with directors and officers in common and companies owned in whole or in part by executive officers, directors or close family members of those individuals as follows:

individuals as follows:
Name	Nature of transactions
Docherty Capital Corp. (Tyrone Docherty)	Management fees charged as CEO, expense allowances, share-based compensation
Saulnier Business Consulting LLP (Pamela Saulnier)	Management fees charged as CFO, expense allowances, share-based compensation
Tony Fogarassy	Consulting fees charged by a director, expense allowances, share-based compensation
Allen Schwabe	Directors fees
Matt Wayrynen	Directors fees

The Company incurred the following fees with individuals and / or companies owned, or partially owned, by key management which the Company defines as officers and directors.

Nine months ended April 30,		2021		2020
Management fees CEO	$	67,500	$	67,500
Management fees CFO		22,500		22,500
Directors fees		10,000		10,000
Consulting fees		45,000		45,000
Rent (included in office and miscellaneous)		13,500		-
Total	$	158,500	$	145,000

The Company owes amounts to key management personnel as follows:

Nine months ended April 30,	2021	2020
Due to key management or companies controlled by
key management personnel	$ 312,113	$ 173,563
Total	$ 312,113	$ 173,563

Balances owed to related parties are unsecured and non-interest bearing.

NOTE 14 – SEGMENTED INFORMATION

The Company operates in one business segment being the acquisition and exploration of exploration and evaluation assets in Canada, as described in note 8. The total assets attributable to the geographical locations relate primarily to equipment and reclamation deposits.

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FIRST TELLURIUM CORP. NOTES TO THE FINANCIAL STATEMENTS For the nine months ended April 30, 2021

NOTE 15 – CONTINGENCIES

Contingencies

The Company may be involved in legal proceedings from time to time, arising in the ordinary course of its business. Management of the Company is not currently aware of any claims or actions that would materially affect the Company’s reported financial position or results from operations.

In January 2021, the Issuer was provided with information relating to a potential previously undisclosed NSR on the property. Management is seeking further information and clarification and will issue a news release if and when it is determined this is a valid charge against the property.

NOTE 16 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Classification of financial instruments

Financial instruments measured at fair value are classified into one of three levels using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value (“FV”) hierarchy has the following levels:

Level 1- quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2- inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (ie. as prices) or indirectly (ie. derived from prices); and

• Level 3- inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Company`s financial instruments consist of cash, receivables, loan receivable, reclamation deposit, accounts payable and accrued liabilities, loans payable and due to related parties.

Fair values

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.

The fair value of cash is measured at Level 1 of the fair value hierarchy. The carrying value of receivables, loan receivable, reclamation deposit, accounts payable and accrued liabilities, loans payable and due to related parties approximate their fair value because of the short term nature of these instruments.

Financial instrument risk exposure and risk management

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company considers the fluctuations of financial markets and seeks to minimize potential adverse effects on financial performance. The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board approves and monitors the risk management process.

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FIRST TELLURIUM CORP. NOTES TO THE FINANCIAL STATEMENTS For the nine months ended April 30, 2021

NOTE 16 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Credit risk

Credit risk is the risk of a financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligation. The Company’s exposure to credit risk includes cash, receivables and deposits. The Company reduces its credit risk by maintaining its bank accounts at large international financial institutions. The Company’s receivables consist primarily of tax receivables due from federal government agencies. The maximum exposure to credit risk is equal to the fair value or carrying value of the financial assets.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they become due. The Company’s ability to continue as a going concern is dependent on management’s ability to raise required funding through future equity issuances or debt financings. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and the Board of Directors are actively involved in the review, planning and approval of significant expenditures and commitments. The Company is exposed to liquidity risk.

Interest rate risk

The Company has cash balances and debt. The Company’s current policy is to invest excess cash in investment grade short-term demand deposit certificates issued by its banking institutions. The Company periodically monitors the investments it makes and is satisfied with the credit rating of its banks. The Company is marginally exposed to interest rate risk.

Foreign currency risk

The Company is not exposed to foreign currency risk.

Commodity price risk

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

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FIRST TELLURIUM CORP. NOTES TO THE FINANCIAL STATEMENTS For the nine months ended April 30, 2021

NOTE 17 – CAPITAL MANAGEMENT

The Company manages common shares, stock options, and share purchase warrants as capital. The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.

The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue debt, acquire or dispose of assets, or adjust the amount of cash on hand.

In order to facilitate the management of its capital requirements, the Company prepares expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions.

The Company does not pay out dividends at this time. The Company’s investment policy is to keep its cash treasury on deposit in an interest bearing Canadian chartered bank account. Cash consists of cash on hand, balances with banks and investments in highly liquid instruments, if any. The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents as the fair value approximates carrying value. There have been no changes to the Company’s approach to capital management during the period ended April 30, 2021. The Company is not subject to externally imposed capital requirements.

NOTE 18 – SUBSEQUENT EVENTS

Subsequent to April 30, 2021, the Company:

a) announced it had changed its name from “Deer Horn Capital Inc.” to “First Tellurium Corp.”.

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