Hanstone Gold Corp. — Audit Report / Information 2020

Apr 30, 2021

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FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2020 (Expressed in Canadian Dollars)

UNIT 114B – 8988 FRASERTON COURT BURNABY, BC V5J 5H8

T: 604.239.0868 F: 604.239.0866

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A CHAN AND COMPANY LLP CHARTERED PROFESSIONAL ACCOUNTANT

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of: Hanstone Gold Corp.

Opinion

We have audited the financial statements of Hanston Gold Corp. (the “Company”), which comprise the statements of financial position as at December 31, 2020, and the statements of loss and comprehensive loss, statements of cash flows and statements of changes in shareholders’ equity for the year ended December 31, 2020, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020, and its financial performance and its cash flow for the year ended December 31, 2020 in accordance with International Financial Reporting Standards (IFRSs).

Basis for Opinion

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

Material Uncertainty Related to Going Concern

We draw attention to Note 1 in the financial statements, which indicates that the Company incurred a net comprehensive loss of $2,509,847 during the year ended December 31, 2020 and, as of that date, the Company had not yet achieved profitable operations, had accumulated losses of $2,594,185 since its inception, and expects to incur further losses in the development of its business. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Matter

The financial statements of the Company for the year ended December 31, 2019 were audited by another auditor who expressed an unmodified opinion on those consolidated statements on April 23, 2020.

Other Information

Management is responsible for the other information. The other information comprises the Management Discussion and Analysis.

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

In connection with our audits of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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

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

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

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

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Auditor’s Responsibilities for the Audit of the Financial Statements

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

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

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

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

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

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

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

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

The engagement practitioner on the audit resulting in this independent auditor’s report is Anthony Chan, CPA, CA.

“A Chan & Company LLP” Chartered Professional Accountant

Unit# 114B (2nd floor) – 8988 Fraserton Court Burnaby, BC, Canada V5J 5H8

April 29, 2020

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HANSTONE GOLD CORP. STATEMENTS OF FINANCIAL POSITION As at December 31, 2020 and December 31, 2019 (Expressed in Canadian dollars)

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	December 31,2020 December 31,2019
ASSETS Current Cash GST receivable Total current assets Property and equipment(Note 4) Exploration and evaluation assets(Note 5) Total assets	568,885 $ 350,972 $ 75,555 - 644,440 350,972 331,409 - 896,000 - 1,871,849 $ 350,972 $
LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities Tota liabilities Shareholders' equity Share capital (Note 6) Stock options reserve Deficit Total shareholders' equity Total liabilities and shareholders' equity	119,349 $ 10,126 $ 119,349 10,126 4,063,996 383,644 282,689 41,540 (2,594,185) (84,338) 1,752,500 340,846 1,871,849 $ 350,972 $

Nature of operations and going concern (Note 1) Basis of presentation (Note 2) Events subsequent to the end of the period (Note 12)

On behalf of the Board:

“Robert J Quinn” “Bob Hans” Director Director

The accompanying notes are an integral part of these financial statements

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HANSTONE GOLD CORP. STATEMENTS OF LOSS AND COMPREHENSIVE LOSS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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		For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
		2020		2019
EXPENSES
Advertising	$	30,345	$	709
Audit and accounting		21,500		8,200
Exploration expenditures (Note 5)		2,045,528		-
Legal		129,575		19,303
Listing and filing		-		22,041
Management fees		147,093		-
Office supplies and services		19,332		1,346
Rent		13,200		-
Stock-based compensation		261,272		-
Transfer agent fees		37,977		6,126
Travel		9,743		-
	$	(2,715,565)	$	(57,725)
OTHER ITEM
Flow-through share premium recovery		204,795		-
Interest income		923		1,157
Net loss for the period	$	(2,509,847)	$	(56,568)
Basic and diluted loss per share	$	(0.18)	$	(0.01)
Weighted average number of common shares outstanding		13,586,348		5,021,918

The accompanying notes are an integral part of these financial statements

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HANSTONE GOLD CORP. STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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	Number of Shares Amount Share Capital	Number of Shares Amount Share Capital	Stock Options	Deficit Total
	Number of Shares
Balance, December 31, 2018 Private placement (Note 6) Share issue costs Loss for the year Balance, December 31, 2019 Private placement (Note 6) Share issue costs Shares issued for exploration and evlauation assets (Notes 5 and 6) Exercise of options Flow-through share premium Stock-based compensation Loss for the year Balance, December 31, 2020	3,000,000 3,000,000 - - 6,000,000 15,528,914 - 4,700,000 400,000 - - - 26,628,914	150,000 $ 300,000 (66,356) - 383,644 3,000,000 (20,976) 846,000 60,123 (204,795) - - 4,063,996 $	25,700 $ - 15,840 - 41,540 - - - (20,123) - 261,272 - 282,689 $	(27,770) $ 147,930 $ - 300,000 - (50,516) (56,568) (56,568) (84,338) 340,846 - 3,000,000 - (20,976) - 846,000 - 40,000 - (204,795) - 261,272 (2,509,847) (2,509,847) (2,594,185) $ 1,752,500 $

The accompanying notes are an integral part of these financial statements

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HANSTONE GOLD CORP. STATEMENTS OF CASH FLOWS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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	2020 2019 For the years ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES Loss for the year Adjustment for non-cash item: Depreciation included in exploration expenditures Flow-through share premium recovery Stock-based compensation Changes in non-cash working capital items: GST receivable Accounts payable and and accrued liabilities Net cash (used in) provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Exploration and evaluation assets - option payments Purchase of property and equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from common shares issued, net Proceeds from exercise of options Net cash provided by financing activities Change in cash during the year Cash, beginning of year Cash, end of year	(2,509,847) $ (56,568) $ 36,823 - (204,795) - 261,272 - (75,555) 49,654 109,223 10,126 (2,382,879) 3,212 (50,000) - (368,232) - (418,232) - 2,979,024 249,484 40,000 - 3,019,024 249,484 217,913 252,696 350,972 98,276 568,885 $ 350,972 $
Supplemental Cash Flow Information Interest received Interest paid Income taxes paid	923 $ 1,157 $ - $ - $ - $ - $

The accompanying notes are an integral part of these financial statements

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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1. NATURE OF OPERATIONS AND GOING CONCERN

Hanstone Gold Corp. (the “Company”) (formerly Hanstone Capital Corp.) was incorporated under the Business Corporations Act (British Columbia) on October 11, 2018. Effective on August 19, 2020, the Company changed its name.

The principal business of the Company is the acquisition and exploration of mineral properties. The registered office of the Company is Suite 600-1090 West Georgia Street, Vancouver, BC V6E 3V7, while the head office and principal business address of the Company is 970 – 777 Hornby Street, Vancouver, B.C. V6Z 1S4.

The Company entered into two asset purchase agreements on March 17, 2020 to purchase the Doc and Snip North Properties in Northern British Columbia. The transactions closed on August 18, 2020 (Note 3).

Going Concern

These financial statements have been prepared on the 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. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due. As at December 31, 2020, the Company has not generated any revenues from operations and has an accumulated deficit of $2,594,185.

The Company expects to incur further losses in the development of its business, all of which casts significant doubt about the Company’s ability to continue as a going concern. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing. Management is of the opinion that sufficient working capital will be obtained from external financing to meet the Company’s liabilities and commitments as they become due, although there is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company. These financial statements do not reflect any adjustments to the carrying values of assets and liabilities, the reported expenses, and the balance sheet classifications used that may be necessary if the Company is unable to continue as a going concern.

Global Pandemic

In March 2020, the World Health Organization declared a global pandemic related to the COVID-19 virus. The expected impacts on global commerce are anticipated to be far reaching. To date there have been significant effects on the world’s equity markets and the movement of people and goods has become restricted.

As the Company does not have production activities, the ability to fund ongoing exploration is affected by the availability of financing. Due to market uncertainty, the Company may be restricted in its ability to raise additional funding.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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The impact of these factors on the Company is not yet determinable; however, they may have a material impact on the Company's financial position, results of operations and cash flows in future periods. ln particular, there may be heightened risk of mineral property impairment and going concern uncertainty. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operations in future periods. These financial statements do not include adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

2. BASIS OF PRESENTATION

Statement of Compliance

These financial statements have been prepared in accordance 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”).

These financial statements have been prepared on a historical cost basis. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the December 31, 2019 audited financial statements.

These financial statements were authorized for issue by the Audit Committee and Board of Directors on April 29, 2021.

Basis of Measurement

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

These financial statements are presented in Canadian dollars, which is also the Company’s functional currency.

3. SIGNIFICANT ACCOUNTING POLICIES

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and subject to an insignificant risk of change in value. As at December 31, 2020, the Company held $90,000 (2019 - $Nil) in cashable GIC that is classified as cash equivalent.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

i) Financial assets

The Company classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value (either through other comprehensive income (OCI) or through profit or loss); and

• those to be measured at amortized cost.

The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses are either recorded in profit or loss or OCI.

At present, the Company classifies all financial assets as held at amortized cost. Cash is classified as a financial asset.

Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss. Financial assets are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Subsequent measurement of financial assets depends on their classification. There are three measurement categories under which the Company classifies its financial assets:

• Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included as finance income using the effective interest rate method.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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• Fair value through OCI (FVOCI): Debt instruments that are held for collection of contractual cash flows and for selling the debt instruments, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains and losses, interest revenue, and foreign exchange gains and losses which are recognized in profit or loss. When the debt instrument is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains (losses). Interest income from these debt instruments is included as finance income using the effective interest rate method.

• Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVTPL. A gain or loss on an investment that is subsequently measured at FVTPL is recognized in profit or loss and presented net as revenue in the statement of loss and comprehensive loss in the period in which it arises.

ii) Financial liabilities

A financial liability is classified as at FVTPL if it is classified as held-for-trading or is designated as such on initial recognition. Directly attributable transaction costs are recognized in profit or loss as incurred. The fair value changes to financial liabilities at FVTPL are presented as follows: where the Company optionally designates financial liabilities at FVTPL the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in OCI; and the remaining amount of the change in the fair value is presented in profit or loss. The Company does not designate any financial liabilities at FVTPL.

Other non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost using the effective interest method.

At present, the Company classifies all of its financial liabilities as held at amortized cost. These financial liabilities are classified as current liabilities as the payment is due within 12 months.

Capital stock

Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company’s common shares are classified as equity instruments.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or corporate entities.

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

Impairment of long-lived assets

At the end of each reporting period, the Company’s assets are reviewed to determine whether there is any indication that those assets may be impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Financing costs

Costs incurred to obtain equity financing are deducted from the value assigned to shares issued. When costs are incurred prior to the closing of a financing arrangement, these amounts are presented as a deferred asset until the financing has closed. When an expected financing arrangement does not occur, any deferred costs are recorded as an expense.

Provision and contingent liabilities

Provisions for environmental restoration, restructuring costs and legal claims are recognized when: the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognized for future operating losses.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.

Income taxes

Tax provisions are recognized when it is considered probable that there will be a future outflow of funds to a taxing authority. In such cases, a provision is made for the amount that is expected to be settled, where this can be reasonably estimated. This requires the application of judgment as to the ultimate outcome, which can change over time depending on facts and circumstances. A change in estimate of the likelihood of a future outflow and/or in the expected amount to be settled would be recognized in income in the period in which the change occurs.

Deferred tax assets or liabilities, arising from temporary differences between the tax and accounting values of assets and liabilities, are recorded based on tax rates expected to be enacted when these differences are reversed. Deferred tax assets are recognized only to the extent it is considered probable that those assets will be recovered. This involves an assessment of when those deferred tax assets are likely to be realized, and a judgment as to whether or not there will be sufficient taxable profits available to offset the tax assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in respect of deferred tax assets as well as in the amounts recognized in income in the period in which the change occurs.

Tax provisions are based on enacted or substantively enacted laws. Changes in those laws could affect amounts recognized in income both in the period of change, which would include any impact on cumulative provisions, and in future periods.

(Loss) earnings per share

Basic (loss) earnings per share is calculated by dividing net (loss) earnings by the weighted average number of common shares outstanding during the period which excludes shares held in escrow.

Diluted earnings per share is determined by adjusting the earnings or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of dilutive instruments, which includes stock options and common share purchase warrants, as if their dilutive effect was at the beginning of the period. The calculation of the diluted number of common shares assumes that proceeds received from the exercise of “in-the-money” stock options and common share purchase warrants are used to purchase common shares of the Company at their average market price for the period.

In periods that the Company reports a net loss, basic per share amounts are the same as on a diluted basis as the result would be anti-dilutive.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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Use of estimates and measurement uncertainties

The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the measurements of assets, liabilities, revenues, expenses and certain disclosures reported in these financial statements. Significant estimates made by management include the following:

Valuation of exploration and evaluation assets

Management has determined that exploration, evaluation, and related costs incurred which were capitalized may have future economic benefits and may be economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefits including, geologic and other technical information, a history of conversion of mineral deposits with similar characteristics to its own properties to proven and probable mineral reserves, evaluation of permitting and environmental issues and local support for the project.

Share based compensation

The Company uses the Black-Scholes option pricing model for valuation of share-based compensation. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate and forfeiture rate. Changes in the input assumptions can significantly change the fair value estimate and the Company’s earnings and equity reserves.

Deferred income taxes

Judgement is required in determining whether deferred tax assets are recognized in the statements of financial position. Deferred tax assets, including those arising from unutilized tax losses require management to assess the likelihood that the Company will generate taxable income in future periods, in order to utilize deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the date of the statements of financial position could be impacted. The Company has not recorded any deferred tax assets.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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4. PROPERTY AND EQUIPMENT

	Camp Building	TOTAL
COSTS
Balance, December 31, 2019	-	-
Additions	368,232	368,232
Balance, December 31, 2020	368,232	368,232
ACCUMULATED DEPRECIATION
Balance, December 31, 2019	-	-
Depreciation	36,823	36,823
Balance, December 31, 2020	36,823	36,823
NET BOOK VALUE
Balance, December 31, 2019	-	-
Balance, December 31, 2020	331,409	331,409

During the year ended December 31, 2020, the Company recorded a depreciation expense of $36,823 (2019 - $Nil) related to the Camp Building and has been included in the exploration expenditures for the year.

5. EXPLORATION AND EVALUATION ASSETS

Exploration assets consist entirely of costs incurred in relation to the acquisition of the Company’s mineral properties. All exploration expenditures are expensed in the period incurred.

			Snip North
		Doc Property	Property	TOTAL
	Balance, December 31, 2019	-	-	-
	Property acquisition costs - shares	810,000	36,000	846,000
	Propertyacquisition costs - cash	50,000	-	50,000
	Balance, December 31, 2020	860,000	36,000	860,000

The outcome of ongoing exploration activities, and therefore whether the carrying value of exploration assets will ultimately be recovered, is inherently uncertain. Management has reviewed the projects above at December 31, 2020 for any indicators of impairment and determined that no indicators were present. This assessment includes a review of the expiry dates of claims, the likelihood of meeting the annual expenditure requirements to maintain the claims in good standing, management’s assessments of the results of geological studies, drilling and the intentions to carry on future work on these claims based on the results to date.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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Doc Property

The Company and Milestone entered into an asset purchase agreement dated as of March 17, 2020 (the “Milestone Agreement”) respecting the acquisition of Milestone’s option agreement on the Doc Property (the “Transaction”). The Doc Property is comprised of 8 mineral claims located in the Skeena Mining Division in British Columbia. The Company also entered into an assignment and assumption agreement (“Bot Option Agreement”) with Mr. John Bot (“Bot”) to continue with the original option agreement entered into with Milestone. As a result of the assumption agreement, the Company has the exclusive and irrevocable right to acquire a 100% interest in the Doc Property from Bot. Under the Bot Option Agreement entered between the Company and Bot, to successfully exercise the option to acquire 100% of the Doc Property, the Company is required to make cash payments having an aggregate of $1,825,000 to Bot, over six years as follows:

1. $50,000 on July 3, 2019, being the effective date of the original Option Agreement (paid); 2. $50,000 on or before (a) the date which is seven days after resumption of trading of Hanstone shares on the TSXV following the completion of its Qualifying Transaction; and (ii) September 30, 2020 (paid);

2. $50,000 on July 3, 2021;

3. $200,000 on July 3, 2022;

4. $400,000 on July 3, 2023;

5. $500,000 on July 3, 2024; and

6. $575,000 on July 3, 2025.

In addition, under the Bot Option Agreement, the Company has granted to Bot a 1.5% net smelter returns royalty (the “Bot NSR”) on the Doc Property. The Company has the right at any time to repurchase the Bot NSR from Bot by paying $500,000 to Bot. Until the Company has successfully exercised the option under the Bot Option Agreement, the Company is required to grant Bot a bulk sample royalty of 5% on the Doc Property. Under the Milestone Agreement, the Company issued an aggregate of 4,500,000 common shares of the Company to Milestone’s stakeholders at a deemed price of $0.18 per share for a value of $810,000 (Note 6). The Transaction was completed on August 19, 2020. Under the terms of the Agreement an option payment of $50,000 was made on August 19, 2020. As at December 31, 2020, the Company has spent $2,045,528 in exploration expenditures on the property.

Snip North Property

The Company entered into an asset purchase agreement with Richard Mill (“Mill”) dated as of March 17, 2020 (the “Mill Agreement”) respecting the proposed acquisition from Mill of 100% of Mill’s right, title and interest in and to the Snip North property (the “Snip North Property”), comprised of 5 mineral claims located in British Columbia, approximately 50 kilometers north of the Doc Property. As consideration for the acquisition of the Snip North Property, the Company issued an aggregate of 200,000 common shares of the Company to Mill at a deemed price of $0.18 per share for a value of $36,000 (Note 6). The transaction was completed on August 19, 2020.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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6. SHAREHOLDERS’ EQUITY

Authorized share capital

Unlimited common shares, without par value.

Share issuances

On October 11, 2018, the Company issued 3,000,000 common shares at $0.05 to the founding directors and officers of the Company for proceeds of $150,000.

On April 29, 2019, the Company completed its initial public offering by issuing an aggregate of 3,000,000 common shares at a price of $0.10 per share for gross proceeds of $300,000. The Company paid a commission of 10% of the gross proceeds of the offering and a corporate finance fee of $10,000 to the agent in the transaction.

On August 19, 2020, the Company issued 4,700,000 common shares in relation to the acquisition of the Doc Property and the Snip North Property with an aggregate fair value of $846,000 (Note 5).

On August 19, 2020, the Company closed a private placement financing for gross proceeds of $3,000,000. The Company raised $2,268,588 in gross proceeds through the issuance of 12,603,266 subscription units (“Unit”) at a price of $0.18 per Unit, with each Unit comprised of one common share and one common share purchase warrant. The remaining gross proceeds of $731,412 were raised through the issuance of 2,925,648 “flow-through” units (“FT Unit”) at a price of $0.25 per FT Unit, with each FT Unit comprised of one “flow-through” common share and one common share purchase warrant.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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On September 2, 2020, the Company issued 100,000 common shares upon exercise of stock options at $0.10 per share for a gross proceed of $10,000.

On September 11, 2020, the Company issued 300,000 common shares upon exercise of stock options at $0.10 per share for a gross proceed of $30,000.

As at December 31, 2020, the Company has 26,628,914 common shares issued and outstanding.

Escrow Shares

As at December 31, 2020, a total of 6,828,219 common shares were subject to a Capital Pool Company (“CPC”) Escrow Agreement and a Tier 2 Exchange Escrow Agreement. Under both the CPC Escrow Agreement and the Tier 2 Exchange Agreement, 10% of the escrowed common shares were released from escrow on the issuance of the Final Exchange Bulletin (the “Initial Release”) and an additional 15% will be released on the dates 6, 12, 18, 24, 30 and 36 months following the Initial Release.

Stock Options

On December 4, 2018 the Company adopted an incentive stock option plan (the “Option Plan”) which allows the Company’s Board of Directors, at its discretion and in accordance with TSX Venture Exchange requirements, to grant non-transferable options to purchase common shares to its directors, officers, employees and consultants to the Company. The number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares. Such options will be exercisable for a period of up to ten years from the date of grant and vesting terms will be determined at the time of grant by the Board of Directors.

Incentive Stock Options

On December 4, 2018, the Company granted 600,000 stock options to directors and officers of the Company with an exercise price of $0.10 per share for ten years and have an expiry date of April 29, 2029. The fair value of these options was calculated to be $25,700 using the Black-Scholes Option Pricing Model using the following assumptions: expected life of the option: 10 years; expected volatility: 100%; expected dividend yield: 0%; and risk-free interest rate: 2.18%.

On August 19, 2020, the Company granted 1,120,000 stock options to directors, officers and consultants of the Company with an exercise price of $0.20 per share for ten years and have an expiry date of August 19, 2030. The fair value of these options was calculated to be $198,240 using the Black-Scholes Option Pricing Model using the following assumptions: expected life of the option: 10 years; expected volatility: 100%; expected dividend yield: 0%; and risk-free interest rate: 0.16%.

On December 8, 2020, the Company granted 150,000 stock options to consultants of the Company with an exercise price of $0.58 per share for five years and have an expiry date of December 8, 2025. The fair value of these options was calculated to be $63,032 using the Black-Scholes Option Pricing Model using the following assumptions: expected life of the option: 5 years; expected volatility: 100%; expected dividend yield: 0%; and risk-free interest rate: 0.47%.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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Agent’s Options

On April 29, 2019, the Company issued 300,000 options to the Company’s agent as part of the agent’s compensation with respect to the sale of the Company’s initial public offering. The agent’s options are exercisable at a price of $0.10 per share for two years and have an expiry date of April 29, 2021. The agent’s options had a fair value of $15,840 calculated using the Black-Scholes Option Pricing Model using the following assumptions: expected life of the option: 2 years; expected volatility: 100%; expected dividend yield: 0%; and risk-free interest rate: 1.57%.

A summary of the Company’s stock option plan as at December 31, 2020 and 2019:

	December 31, 2020 December 31, 2019
	Number of options Weighted Average Exercise Price Number of options Weighted Average Exercise Price
Outstanding, beginning of period Granted Exercised	900,000 $0.10 900,000 $0.10 1,270,000 $0.24 - - (400,000) $0.10 - -
Outstanding, end ofperiod	1,770,000 $0.20 900,000 $0.10
Exercisable, end ofperiod	1,770,000 $0.20 900,000 $0.10

As at December 31, 2020, 500,000 stock options are exercisable at $0.10 per share expiring on April 29, 2029, 1,120,000 stock options are exercisable at $0.20 per share expiring on August 19, 2030, and 150,000 stock options are exercisable at $0.58 per share expiring on December 8, 2025.

Share Purchase Warrants

Under the private placement dated August 19, 2020, the Company issued an aggregate of 12,603,266 share purchase warrants exercisable for one common share at an exercise price of $0.25 per share, for two years and have an expiry date of August 19, 2022. In addition, the Company issued an aggregate of 2,925,648 share purchase warrants exercisable for one common share at an exercise price of $0.35 per share, for two years and have an expiry date of August 19, 2022.

Also, on August 19, 2020, the Company issued an aggregate of 12,500 finder’s warrants exercisable for one common share at a price of $0.25 per share, for two years and have an expiry date of August 19, 2022, and issued an aggregate of 1,600 finder’s warrants exercisable for one common share at a price of $0.35 per share, for two years and have an expiry date of August 19, 2022.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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A summary of the Company’s share purchase warrants as at December 31, 2020 and 2019:

	December 31, 2020 December 31, 2019
	Number of warrants Weighted Average Exercise Price Number of warrants Weighted Average Exercise Price
Outstanding, beginning of period Issued	- - - - 15,543,014 $0.27 - -
Outstanding, end ofperiod	15,543,014 $0.27 - -

As at December 31, 2020, 12,615,766 share purchase warrants are exercisable at $0.25 per share expiring on August 19, 2022 and 2,927,248 share purchase warrants are exercisable at $0.35 per share expiring on August 19, 2022.

7. RELATED PARTY TRANSACTIONS

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that this consists of corporate officers, executive and non-executive members of the Corporation’s Board of Directors and companies owned by these individuals.

During the year ended December 31, 2020, key management personnel charged the Company $122,000 for management fees, $6,500 in accounting fees and $528,790 in exploration expenditures. In addition, 1,000,000 stock options were issued to directors and officers of the Company with a value of $177,000.

During the year ended December 31, 2019, there were no fees or payments incurred or paid to any key management personnel.

8. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

As at December 31, 2020, the Company’s financial instruments are comprised of cash and accounts payable. The fair values of these financial instruments approximate their carrying values due to their short-term maturity. Fair values of financial instruments are classified in a fair value hierarchy based on the inputs used to determine fair values. The levels of the fair value hierarchy are as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 – Inputs that are not based on observable market data (unobservable inputs).

As at December 31, 2020, the fair value of cash held by the Company was based on Level 1 of the fair value hierarchy.

The Company’s risk exposure and the impact on the Company’s financial instruments is summarized below :

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company’s credit risk is primarily attributable to its cash. The Company limits exposure to credit risk by maintaining its cash with large financial institutions. The Company does not have cash that is invested in asset backed commercial paper.

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 currently settles its financial obligations out of cash. The ability to do this relies on the Company raising equity financing in a timely manner and by maintaining sufficient cash in excess of anticipated needs. Management and the Board of Directors are actively involved in the review, planning and approval of significant expenditures and commitments. At December 31, 2020, the Company is not exposed to any significant liquidity risk

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 market interest rates. The Company manages interest rate risk by maintaining an investment policy that focuses primarily on preservation of capital and liquidity. This risk is considered to be minimal.

Foreign exchange risk

Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as they are denominated in currencies that differ from the respective functional currency. The Company’s functional currency is the Canadian dollar. There are no current assets held in other currencies and therefore the foreign exchange risk is assessed as low.

9. CAPITAL MANAGEMENT

Capital is comprised of the Company’s shareholders’ equity and any debt that it may issue. As at December 31, 2020, the Company’s shareholders’ equity was $1,752,500. The Company’s objectives when managing capital are to maintain financial viability and to protect its ability to meet its on-going liabilities, to continue as a going concern, to maintain creditworthiness and to maximize returns for shareholders over the long term. Protecting the ability to pay current and future liabilities includes maintaining capital above minimum regulatory levels, current financial strength rating requirements and internally determined capital guidelines and calculated risk management levels.

The Company’s current capital was received from the issuance of common shares. The net proceeds raised to date will only be sufficient to identify and evaluate a limited number of assets and businesses. Additional funds may be required to finance the Company’s future business opportunities.

The Company is not subject to any externally imposed capital requirements, except as noted above. There were no changes to the Company’s approach to capital management during the year ended December 31, 2020.

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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10. SEGMENTED INFORMATION

The Company operates in one reportable segment, being exploration of mineral assets. As the operations comprise a single reporting segment, amounts disclosed also represent segment amounts.

11. INCOME TAXES

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

2020 $	2019
	$
Loss before income taxes (2,509,847)	(56,568)
Expected income tax (recovery) (677,659)	(15,273)
Permanent differences 64,880	(13,640)
Change in prior year estimates 2,729	-
Flow-through premium liability (204,795)	-
Change in unrecognized deferred tax assets 610,050	28,913
Total income tax recovery (204,795)	-

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

	2020	2019
	$	$
Deferred income tax assets:
Non-capital loss carryforwards	74,516	18,560
Share issue costs	12,714	10,912
Exploration and development expenditures	542,350	-
Propertyand equipment	9,942	-
	639,522	29,472
Deferred tax assets not recognized	(639,522)	(29,472)
Net deferred tax assets	-	-

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HANSTONE GOLD CORP. NOTES TO THE FINANCIAL STATEMENTS For the years ended December 31, 2020 and 2019 (Expressed in Canadian dollars)

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The tax pools relating to these deductible temporary differences expire as follows:

	Expiry Date Range
Temporary Differences
Non-capital losses available for future period (Canada)	2038 to 2040
Share issue costs	2021 to 2024
Exploration and development expenditures	N/A
Property and equipment	N/A

12. SUBSEUENT EVENTS

On January 29, 2021, the Company issued 875,000 stock options to certain directors, officers and consultants of the Company with an exercise price of $0.40 per share, expiring on January 29, 2026.

In February 2021, the Company approved the issuance of 268,000 common shares of the Company to the Company’s President and CEO in recognition of his significant contributions to the Company since completion of the Company’s Qualifying Transaction on August 19, 2020.

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