IsoEnergy Ltd. — Interim / Quarterly Report 2021

May 5, 2021

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Unaudited Condensed Interim Financial Statements of

ISOENERGY LTD.

For the three months ended March 31, 2021 and 2020

1

ISOENERGY LTD. CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION (Unaudited)

(Expressed in Canadian Dollars)

As at

	Note	March 31, 2021	December 31, 2020
ASSETS
Current
Cash		$ 13,354,634	$ 14,034,565
Accounts receivable		19,427	67,967
Prepaid expenses		162,728	197,419
		13,536,789	14,299,951
Non-Current
Deposit		9,274	9,274
Property and equipment	6	206,774	182,439
Exploration and evaluation assets	7	54,122,263	53,731,796
TOTAL ASSETS		$ 67,875,100	$ 68,223,460
LIABILITIES
Current
Accounts payable and accrued liabilities		$ 789,704	$ 238,650
Current portion of lease liability	8	66,745	66,745
		856,449	305,395
Non-Current
Convertible debentures	9	16,742,864	14,033,992
Long-term lease liability	8	70,883	84,895
Deferred income tax liability	11	392,522	711,587
TOTAL LIABILITIES		18,062,718	15,135,869
EQUITY
Share capital	12	68,571,993	67,491,167
Share option and warrant reserve	12	4,089,615	4,235,150
Accumulated deficit		(22,666,002)	(18,566,260)
Other comprehensive loss		(183,224)	(72,466)
TOTAL EQUITY		49,812,382	53,087,591
TOTAL LIABILITIES AND EQUITY		$ 67,875,100	$ 68,223,460

Nature of operations (Note 2) Commitments (Notes 8, 9 and 10) Subsequent event (Note 18)

The accompanying notes are an integral part of the condensed interim financial statements These financial statements were authorized for issue by the Board of Directors on May 4, 2021

“ Tim Gabruch ” “ Trevor Thiele ” Tim Gabruch, CEO, Director Trevor Thiele, Director

ISOENERGY LTD.

CONDENSED INTERIM STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Unaudited)

(Expressed in Canadian Dollars) For the three months ended March 31

	Note	2021	2020
General and administrative costs
Share-based compensation	12, 13	$ 255,336	$ 142,486
Administrative salaries, contract and director fees	13	1,165,013	176,515
Investor relations		96,120	149,460
Office and administrative		39,446	38,211
Professional and consultant fees		36,617	59,173
Travel		-	40,446
Public company costs		53,218	41,235
Depreciation expense		14,699	15,528
Total general and administrative costs		(1,660,449)	(663,054)
Interest income		20,111	22,549
Interest on lease liability	8	(2,615)	(2,615)
Interest on convertible debentures	9	(161,466)	-
Fair value loss on convertible debentures	9	(2,598,114)	-
Foreign exchange gain		(25,361)	-
Rental income		9,087	7,576
Loss from operations		(4,418,807)	(635,544)
Deferred income tax recovery (expense)	11	319,065	(299,219)
Loss		$(4,099,742)	$ (934,763)
Other comprehensive loss
Change in fair value of convertible debentures
attributable to the change in credit risk	9	(110,758)	-
Total comprehensive loss for theperiod		$(4,210,500)	$(934,763)
Lossper common share – basic and diluted		$(0.04)	$(0.01)
Weighted average number of common shares
outstanding – basic and diluted		94,914,123	84,268,865

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

3

ISOENERGY LTD. CONDENSED INTERIM STATEMENTS OF CHANGES IN EQUITY (Unaudited)

(Expressed in Canadian Dollars)

	Note	Number of common shares	Share capital	Share option and warrant reserve	Accumulated deficit	Accumulated other comprehensive loss	Accumulated other comprehensive loss	Total
Balance as at January 1, 2020		84,267,500	$58,740,682	$3,769,204	$(9,022,887)	$	-	$53,486,999
Shares issued on the exercise of warrants	12	6,089	3,567	(1,253)	-		-	2,314
Share-based payments	12	-	-	203,338	-		-	203,338
Loss for the period		-	-	-	(934,763)		-	(934,763)
Balance as at March 31, 2020		84,273,589	$58,744,249	$3,971,289	$(9,957,650)	$	-	$52,757,888
Balance as at January 1, 2021		94,472,998	$67,491,167	$4,235,150	$(18,566,260)	$(72,466)		53,087,591
Shares issued on the exercise of warrants	12	7,779	4,575	(1,074)	-		-	3,501
Shares issued on the exercise of stock options	12	930,000	1,076,251	(433,527)	-		-	642,724
Share-based payments	12	-	-	289,066	-		-	289,066
Loss for the period		-	-	-	(4,099,742)		-	(4,099,742)
Other comprehensive loss for the period		-	-	-	-	(110,758)		(110,758)
Balance as at March 31, 2021		95,410,777	$68,571,993	$4,089,615	$(22,666,002)	$(183,224)		49,812,382

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

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ISOENERGY LTD. CONDENSED INTERIM STATEMENTS OF CASH FLOWS (Unaudited)

(Expressed in Canadian Dollars) For the years ended March 31

	2021 2020 Cash flows from (used in) operating activities Loss for the period $ (4,099,742) $ (934,763) Items not involving cash: Share-based compensation 255,336 142,486 Deferred income tax (recovery) expense (319,065) 299,219 Depreciation expense 14,699 15,528 Interest on lease liability 2,615 2,615 Interest on convertible debentures 161,466 - Fair value loss on convertible debentures 2,598,114 - Changes in non-cash working capital Accounts receivable 48,540 (169,509) Prepaid expenses 34,691 21,235 Accounts payable and accrued liabilities 446,438 (23,936) $ (856,908) $ (647,125) Cash flows used in investing activities Additions to exploration and evaluation assets $ (410,845) $ (2,171,879) Acquisition of exploration and evaluation assets - (31,198) Additions to equipment (41,776) - $ (452,621) $ (2,203,077) Cash flows from (used in) financing activities Shares issued for warrant exercise 3,501 $ 2,314 Shares issued for option exercise 642,724 - Lease liability payments: Principal (14,012) (14,011) Interest (2,615) (2,615)
	$ 629,598 $ (14,312)
	Change in cash $ (679,931) $ (2,864,514) Cash, beginningofperiod 14,034,565 6,587,075 Cash, end of period $ 13,354,634 $ 3,722,561

Supplemental disclosure with respect to cash flows (Note 17)

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

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

1. REPORTING ENTITY

IsoEnergy Ltd. (“ IsoEnergy ”, or the “ Company ”) is an exploration stage entity engaged in the acquisition, exploration and evaluation of uranium properties in Canada. The Company’s registered and records office is located on the 10[th] Floor, 595 Howe Street, Vancouver, BC, V6C 2TS. The Company’s common shares are listed on the TSX Venture Exchange (the “ TSXV ”).

As of March 31, 2021, the Company did not have any subsidiaries and NexGen Energy Ltd (“ NexGen ”) holds 50.58% of IsoEnergy’s outstanding common shares.

2. NATURE OF OPERATIONS

As an exploration stage company, the Company does not have revenues and historically has recurring operating losses. As at March 31, 2021, the Company had accumulated losses of $22,666,002 and working capital of $12,680,340. The Company depends on external financing for its operational expenses.

The business of exploring for and mining of minerals involves a high degree of risk. As an exploration company, IsoEnergy is subject to risks and challenges similar to companies at a comparable stage. These risks include, but are not limited to, negative operating cash flow and dependence on third party financing; the uncertainty of additional financing; the limited operating history of IsoEnergy; the lack of known mineral resources or reserves; the influence of a large shareholder; alternate sources of energy and uranium prices; aboriginal title and consultation issues; risks related to exploration activities generally; reliance upon key management and other personnel; title to properties; uninsurable risks; conflicts of interest; permits and licenses; environmental and other regulatory requirements; political regulatory risks; competition; and the volatility of share prices.

Since March 2020, several measures have been implemented in Canada and the rest of the world in response to the increased impact from novel coronavirus (COVID-19). The Company continues to operate our business at this time. While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and the impacts of COVID-19 on our business operations cannot be reasonably estimated at this time. We anticipate this could have an adverse impact on our business, results of operations, financial position and cash flows in 2021. A program of core drilling at the Hurricane Zone on the Larocque East property was tentatively planned for the winter 2021 drilling season, however due to COVID-19 concerns, the Company decided not to proceed with the program. The Company is planning a summer drilling program; this may also be impacted by the COVID-19 pandemic.

These financial statements have been prepared using IFRS applicable to a going concern, which assumes 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 ability of the Company to continue as a going concern is dependent on its ability to obtain financing and achieve future profitable operations.

The underlying value of IsoEnergy’s exploration and evaluation assets is dependent upon the existence and economic recovery of mineral resources or reserves and is subject to, but not limited to, the risks and challenges identified above.

3. BASIS OF PRESENTATION

Statement of Compliance

These condensed interim financial statements for the three months ended March 31, 2021, including comparatives, have been prepared in accordance with International Accounting Standard (“ IAS ”) 34 Interim Financial Reporting. They do not include all of the information required by International Financial Reporting Standards (“ IFRS ”) for annual financial statements and should be read in conjunction with the audited annual financial statements for the year ended and as at December 31, 2020.

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

3. BASIS OF PRESENTATION (continued)

Basis of Presentation

These financial statements have been prepared on a historical cost basis, except for certain financial instruments which have been measured at fair value. In addition, these financial statements have been prepared using the accrual basis of accounting except for cash flow information. All monetary references expressed in these financial statements are references to Canadian dollar amounts (“$”), unless otherwise noted. These financial statements are presented in Canadian dollars, which is the functional currency of the Company.

Critical accounting judgments, estimates and assumptions

The preparation of the consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable in the circumstances. Uncertainty about these judgments, estimates and assumptions could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Information about significant areas of judgement and estimation uncertainty considered by management in preparing the financial statements are set out in Note 3 to the annual financial statements for the year ended December 31, 2020 and have been consistently followed in preparation of these condensed interim financial statements.

4. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies followed by the Company are set out in Note 4 to the annual financial statements for the year ended December 31, 2020 and have been consistently followed in preparation of these condensed interim financial statements.

5. PENDING TRANSACTIONS

• (a) Option Agreement

On August 7, 2020, IsoEnergy entered into an agreement with International Consolidated Uranium (“ICU”) (formerly NxGold Ltd., a company with common directors) to grant ICU the option to acquire a 100% interest in the Company’s Mountain Lake uranium property in Nunavut, Canada (“ Option Agreement ”). This Option Agreement is awaiting ICU shareholder approval and hence the terms of the Option Agreement are not reflected in these financial statements other than the $20,000 deposit paid prior to December 31, 2020.

Under the terms of the Option Agreement, ICU obtains the option to acquire a 100% interest in the Mountain Lake uranium property for consideration comprised of 900,000 ICU common shares and $20,000 cash (paid). The option is exercisable at ICU’s election on or before the second anniversary of receipt of TSXV approval for additional consideration of $1,000,000, payable in cash or shares of ICU. If ICU elects to acquire the Mountain Lake property, IsoEnergy will be entitled to receive the following contingency payments in cash or shares of ICU:

• If the uranium spot price reaches US$50, IsoEnergy will receive an additional $410,000

• If the uranium spot price reaches US$75, IsoEnergy will receive an additional $615,000

• If the uranium spot price reaches US$100, IsoEnergy will receive an additional $820,000

The spot price contingent payments will expire 10 years following the date the option is exercised.

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

5. PENDING TRANSACTIONS (continued)

(b) Agreement with 92 Energy

On October 27, 2020, IsoEnergy announced that it had entered into a binding Heads of Agreement (the “ Agreement ”) with 92 Energy Pty. Ltd. (“ 92 Energy ”) for 92 Energy to acquire a 100% interest in IsoEnergy’s Clover, Gemini, and Tower uranium properties in Saskatchewan, Canada (the “ Properties ”).

92 Energy is an Australian company that completed an initial public offering (“ IPO ”) of its common shares on the Australian Stock Exchange (the “ ASX ”) on April 14, 2021.

Pursuant to the Agreement, 92 Energy will acquire a 100% interest in the Clover, Gemini, and Tower uranium properties in consideration for the issuance of common shares equivalent to 16.25% of the issued capital of 92 Energy following the IPO. The shares will be issued at a price of A$0.20. Additional consideration to IsoEnergy includes milestone cash payments of A$100,000 within 60 days of 92 Energy’s IPO, and an additional A$100,000 within 6 months of that date. IsoEnergy will retain a 2% NSR on the Properties and will be entitled to nominate a member to 92 Energy’s Board of Directors, provided IsoEnergy maintains a minimum ownership position of 5%. 92 Energy will be required to spend an aggregate of A$1,000,000 on exploration expenditures on the Properties prior to May 1, 2022.

Subsequent to March 31, 2021, 92 Energy provided confirmations to satisfy the conditions for admission of the Company’s securities to quotation on ASX on April 14, 2021. IsoEnergy received 10,755,000 fully paid ordinary shares with an escrow period of 12 months comprising 16.25% of the issued capital of 92 Energy following completion of the IPO. IsoEnergy transferred the Clover, Gemini and Tower uranium properties to 92 Energy. The terms of the Agreement and the transaction had not been completed and were subject to requisite regulatory approval at March 31, 2021 and are therefore not reflected in these financial statements.

6. PROPERTY AND EQUIPMENT

The following is a summary of the carrying values of equipment:

	Right-of- use asset	Software	Field equipment	Office furniture	Total
Cost
Balance, January 1, 2020	$ 259,512	$ 64,947	$ 41,428	$ 13,103	$ 378,990
Additions	-	-	22,017	-	22,017
Balance, December 31, 2020	$ 259,512	$ 64,947	$ 63,445	$ 13,103	$ 401,007
Additions	-	-	41,776	-	41,776
Balance, March 31, 2021	$ 259,512	$ 64,947	$ 105,221	$ 13,103	$ 442,783
Accumulated depreciation
Balance, January 1, 2020	$ 58,799	$ 59,975	$ 18,295	$ 9,789	$ 146,858
Depreciation	58,797	4,972	4,627	3,314	71,710
Balance, December 31, 2020	$ 117,596	$ 64,947	$ 22,922	$13,103	$ 218,568
Depreciation	14,699	-	2,742	-	17,441
Balance, March 31, 2021	$ 132,295	$ 64,947	$ 25,664	$13,103	$ 236,009
Net book value:
Balance, December 31, 2020	$ 141,916	$ -	$ 40,523	$ -	$ 182,439
Balance, March 31, 2021	$ 127,217	$ -	$ 79,557	$ -	$ 206,774

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

7. EXPLORATION AND EVALUATION ASSETS

The following is a summary of the carrying value of the acquisition costs and expenditures on the Company’s exploration and evaluation assets:

	Note	March 31, 2021	March 31, 2021	December 31, 2020
Acquisition costs:
Acquisition costs, opening		$	35,440,432	$ 35,298,069
Additions	a		-	142,363
Acquisition costs, closing		$	35,440,432	$ 35,440,432
Exploration and evaluation costs:
Exploration costs, opening		$	18,291,364	$ 12,668,819
Additions:
Drilling			111,674	2,800,364
Geological and geophysical			8,696	30,500
Labour and wages			191,186	1,140,615
Share-based compensation	12		33,730	234,956
Geochemistry and assays			-	317,508
Environmental			1,233	137,083
Engineering			1,420	224,620
Camp costs			633	594,539
Travel and other			41,895	142,360
Total exploration and evaluation in the period		$	390,467	$ 5,622,545
Exploration and evaluation, closing		$	18,681,831	$ 18,291,364
Total costs, closing		$	54,122,263	$ 53,731,796

All claims are subject to minimum expenditure commitments. The Company expects to incur the minimum expenditures to maintain the claims.

(a) New claim staking

In the year ended December 31, 2020, the Company spent $142,363 to stake several property extensions and 12 new properties in the Eastern Athabasca adding approximately 200,000 hectares of mineral tenure in the Eastern Athabasca. The new exploration properties were Cable, Clover, Evergreen, Gemini, Hawk, Horizon, Larocque West, Ranger, Spruce, Tower, Trident and Sparrow.

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

8. LEASE LIABILITY

The lease liability for the three months ended March 31, are as follows:

		2021		2020
Opening balance, January 1	$	151,640	$	209,231
Interest on lease liability		2,615		8,976
Payments		(16,627)		(66,567)
Lease liability, end of period		137,628		151,640
Less Current portion		(66,745)		(66,745)
Long-term lease liability	$	70,883	$	84,895

The lease is for an office space lease that extends to May 31, 2023. The discount rate applied to the lease is 5%. See Note 6 for information related to the leased asset. In addition to the lease payments the Company pays approximately $47,000 annually related to operating costs and realty taxes of the leased office space. This amount is reassessed annually based on actual costs incurred.

IsoEnergy sub-leases approximately 50% of its office space. The Company accounts for the sublease as an operating lease with amounts received recognised as rental income.

As at March 31, 2021, the minimum future lease payments relating to the leased asset are as follows:

2021	$	50,059
2022		66,745
2023		27,810
	$	144,614

In addition to the leased asset above, the Company engages a drilling company to carry out its drilling programs on its exploration and evaluation properties. The drilling company provides all required equipment. These contracts are short-term, and the Company has elected not to apply the recognition and measurement requirements of IFRS 16 to them. Payments to the drilling company in the three months ended March 31, 2021 were $nil (March 31, 2020 - $2,126,288).

9. CONVERTIBLE DEBENTURES

CONVERTIBLE DEBENTURES
	March 31, 2021	December 31, 2020
Fair value on issuance, August 18, 2020 and	$ 14,033,992	$ 7,629,586
January 1, 2021
Change in fair value in the period included in profit	2,598,114	6,331,940
and loss
Change in fair value in the period included in OCI	110,758	72,466
Fair value, end of period	$ 16,742,864	$ 14,033,992

On August 18, 2020, IsoEnergy entered into an agreement with Queen’s Road Capital Investment Ltd. (the “ Debentureholder ”) for a US$6 million private placement of unsecured convertible debentures (the “ Debentures ”). The Debentures will be convertible at the holder’s option at a conversion price of $0.88 (the “ Conversion Price ”) into a maximum of 9,206,311 common shares (the “ Maximum Conversion Shares ”) of the Company.

On any conversion of any portion of the principal amount of the Debentures, if the number of common shares to be issued on such conversion, taking into account all common shares issued in respect of all prior

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

9. CONVERTIBLE DEBENTURES (continued)

conversions would result in the common shares to be issued exceeding the Maximum Conversion Shares, on such conversion the Debentureholder shall be entitled to receive a payment (the “ Exchange Rate Fee ”) equal to the number of common shares that are not issued as a result of exceeding the Maximum Conversion Shares, multiplied by the 20-day volume-weighted average trading price (“ VWAP ”). IsoEnergy can elect to pay the Exchange Rate Fee in cash or, subject to the TSXV approval, in common shares of the Company.

The Company received gross proceeds of $7,902,000 (US$6,000,000). A 3% establishment fee of $272,414 (US$180,000) was also paid to the Debentureholder through the issuance of 219,689 common shares. The fair value of the Debentures on issuance date was determined to be $7,629,586. The Company revalues the Debentures at the end of each reporting period with the change in the period related to credit risk recorded in Other Comprehensive Income or Loss (“ OCI ”) and other changes in fair value in the period recorded in the loss for the period. The following assumptions were used to estimate the fair value of the Debentures:

	March 31,	December 31,	August 18,
	2021	2020	2020
Expected stock price volatility	49%	46%	48%
Expected life	4.4 years	4.6 years	5 years
Risk free interest rate	1.31%	0.79%	0.76%
Expected dividend yield	0.00%	0.00%	0.00%
Credit spread	19.76%	21.70%	22.80%
Underlying share price of the Company	$2.40	$1.87	$1.24
Conversion price	$0.88	$0.88	$0.88
Exchange rate(C$:US$)	1.2562	1.2725	1.3168

The Debentures carry an 8.5% coupon (the “ Interest ”) over a 5-year term. The Interest is payable semiannually with 6% payable in cash and 2.5% payable in common shares of the Company, subject to TSXV approval, at a price equal to the 20-day VWAP of the Company’s common shares on the TSXV on the twenty days prior to the date such Interest is due. The Interest can be reduced to 7.5% per annum on the public dissemination by the Company of an economically positive preliminary economic assessment study, at which point the cash component of the Interest will be reduced to 5% per annum. In the three months ended March 31, 2021, the Company incurred interest expense of $161,466, (March 31, 2020 – nil). In the year ended December 31, 2020, the Company incurred interest expense of $248,962, of which $174,114 was settled in cash and $74,848 by way of issue of 40,026 common shares of the Company.

The Company will be entitled, on or after the third anniversary of the date of issuance of the Debentures, at any time the 20-day VWAP if the Company’s shares listed on the TSXV exceeds 130% of the Conversion Price, to redeem the Debentures at par plus accrued and unpaid Interest.

Upon completion of a change of control (which includes in the case of the holders’ right to redeem the Debentures, a change in the Chief Executive Officer of the Company), the holders of the Debentures or the Company may require the Company to purchase or the holders to redeem, as the case may be, any outstanding Debentures in cash at: (i) on or prior to August 18, 2023, 130% of the principal amount; and (ii) at any time thereafter, 115% of the principal amount, in each case plus accrued but unpaid interest, if any. In addition, upon the public announcement of a change of control that is supported by the Board, the Company may require the holders of the Debentures to convert the Debentures into common shares at the Conversion Price provided the consideration payable upon the change of control exceeds the Conversion Price and is payable in cash.

A “change of control” of the Company is defined as consisting of: (i) the acquisition, directly or indirectly, by a person or group of persons acting jointly or in concert of voting control or direction over 50% or more of the outstanding common shares, (ii) the amalgamation, consolidation or merger of the Company with or into another entity as a result of which the holders of common shares immediately prior to such transaction, directly or indirectly, hold less than 50% of voting control or direction over the entity carrying on the business of the

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

9. CONVERTIBLE DEBENTURES (continued)

Company following such transaction, (iii) the sale, assignment, transfer or other disposition of all or substantially all of the property or assets of the Company to another entity in which the holders of common shares immediately prior to such transaction, directly or indirectly, hold less than 50% of voting control or direction following such transaction, (iv) the removal by resolution of the shareholders of the Company, of a majority of the then incumbent directors of the Company, which removal has not been recommended in the Company’s management information circular, or the failure to elect to the Company’s board of directors a majority of the directors proposed for election by management in the Company’s management information circular; or (v) the acquisition by any transaction, directly or indirectly, by a person or group of persons acting jointly or in concert of voting control or direction over more of the common shares than are then held by NexGen.

10. COMMITMENTS

The Company has raised funds through the issuance of flow-through shares. Based on Canadian tax law, the Company is required to spend this amount on eligible exploration expenditures by December 31 of the year after the year in which the shares were issued.

The premium received for a flow-through share, which is the price received for the share in excess of the market price of the share, is recorded as a flow-through share premium liability. This liability is subsequently reduced when the required exploration expenditures are made, on a pro rata basis, and accordingly, a recovery of flowthrough premium is then recorded as a reduction in the deferred tax expense to the extent that deferred income tax assets are available.

As of March 31, 2021, the Company is obligated to spend approximately $3,600,000 by December 31, 2022 on eligible exploration expenditures. The 2020 FT Shares (see Note 12(c)) were issued at a price that was below market value on the date of issue and therefore no flow-through share premium liability was recorded.

11. INCOME TAXES

Deferred income tax expense for the three months ended March 31 comprises:

	2021	2020
Deferred income tax recovery related to operations	$ (422,646)	$ (133,126)
Flow-through renunciation	103,581	574,098
Release of flow-through sharepremium liability	-	(141,753)
Deferred income tax(recovery)expense	$(319,065)	$ 299,219

In the three months ended March 31, 2021, the Company incurred $383,634 (three months ended March 31, 2020 - $2,126,288) of eligible exploration expenditures in respect of its flow-through share commitments (Note 10). A deferred income tax expense is recognized due to the taxable temporary difference arising from capitalized exploration and evaluation assets with no tax basis as a result of the renunciation of the tax attributes to the investors in the flow-through shares.

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

12. SHARE CAPITAL

Authorized Capital - Unlimited number of common shares with no par value.

Issued

For the three months ended March 31, 2021

• (a) During the three months ended March 31, 2021, the Company issued 7,779 common shares on the exercise of warrants for proceeds of $3,501. As a result of the exercises, $1,074 was reclassified from reserves to share capital.

• (b) During the three months ended March 31, 2021, the Company issued 930,000 common shares on the exercise of stock options for proceeds of $642,724. As a result of the exercises, $433,527 was reclassified from reserves to share capital.

For the year ended December 31, 2020:

• (c) On December 22, 2020, the Company issued 2,702,703 flow-through shares (the “ 2020 FT Shares ”) at a price of $1.48 per 2020 FT Share for aggregate gross proceeds of $4,000,000. Share issuance costs for the 2020 FT Shares funds raised were $340,115, net of $93,557 of tax. Share issuance costs includes $87,184 related to 162,162 brokers’ warrants which were valued using the Black-Scholes model with a corresponding amount added to the Warrant reserve account in Equity. The brokers’ warrants entitle the holder to purchase an additional common share for a period of two years at an exercise price of $1.48.

• (d) On August 10, 2020, the Company issued 5,882,352 common shares at a price of $0.68 per common share for aggregate gross proceeds of $3,999,999. Share issuance costs were $242,146, net of tax of $89,561.

• (e) On August 18, 2020, the Company issued 219,689 shares to the Debentureholder in connection with the issuance of the Debentures which were valued at $272,414 (see Note 9).

• (f) During the year ended December 31, 2020, the Company issued 1,000,728 common shares on the exercise of warrants for proceeds of $425,767. As a result of the exercises, $167,364 was reclassified from reserves to share capital.

• (g) On August 20, 2020, the Company issued 100,000 shares on the exercise of options for proceeds of $50,000. In the fourth quarter, the Company issued 260,000 common shares on the exercise of options for proceeds of $184,050. As a result of the exercises, $158,303 was reclassified from reserves to share capital.

• (h) On December 31, 2020, the Company issued 40,026 common shares to the Debentureholder to settle $74,848 which is 2.5% of the interest owing on the Debentures (see Note 9).

Stock Options

Pursuant to the Company’s stock option plan, directors may, from time to time, authorize the issuance of options to directors, officers, employees and consultants of the Company, enabling them to acquire up to 10% of the issued and outstanding common shares of the Company. The options can be granted for a maximum term of 10 years and are subject to vesting provisions as determined by the Board of Directors of the Company.

Stock option transactions and the number of stock options outstanding on the dates set forth below are summarized as follows:

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

12. SHARE CAPITAL (continued)

		Weighted average
		exercise price per
	Number of options	share
Outstanding January 1, 2020	6,420,000	$ 0.74
Granted	2,510,000	$ 0.63
Exercised	(360,000)	$ 0.65
Outstanding December 31, 2020	8,570,000	$ 0.71
Granted	250,000	$ 2.44
Exercised	(930,000)	$ 0.69
Outstanding,March 31,2021	7,890,000	$0.77
Number of options exercisable	6,644,995	$0.73

As at March 31, 2021, the Company has stock options outstanding and exercisable as follows:

Number of options Exercise price per option Number of options exercisable Exercise price per option Vesting	Weighted average remaining contractual life (years)
2,950,000 $1.00 2,950,000 $1.00 340,000 $0.57 340,000 $0.57 890,000 $0.36 890,000 $0.36 1,160,000 $0.42 1,160,000 $0.42 1,550,000 $0.39 988,332 $0.39 (i) 750,000 $1.19 233,330 $1.19 (i) 250,000 $2.44 83,333 $2.44 (i) 7,890,000 $0.77 6,644,995 $0.73	0.7 1.6 2.0 2.4 3.4 3.9 4.9
	2.1

(i) Vest 1/3 on grant and 1/3 each year thereafter

The Company uses the Black-Scholes option pricing model to calculate the fair value of granted stock options. The model requires management to make estimates, which are subjective and may not be representative of actual results. Changes in assumptions can materially affect fair value estimates. The following weighted average assumptions were used to estimate the grant date fair values for the three months ended March 31, 2021:

Expected stock price volatility	75%
Expected life of options	5 years
Risk free interest rate	0.25%
Expected dividend yield	0.00%
Weighted average exercise price	$ 2.44
Weighted average fair valueper optiongranted	$1.47

The Company has share-based compensation related to options that vested or forfeited in the period. Sharebased compensation in the period is as follows:

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

12. SHARE CAPITAL (continued)

	2021	2020
Capitalized to explorations and evaluation assets	$ 33,730	$ 60,852
Expensed to the statement of loss and comprehensiveloss	255,336	142,486
	$ 289,066	$203,338

Warrants

As of March 31, 2021, the Company has the following warrants outstanding:

				Weighted
				average exercise
Expiry Date	January 1, 2021	Exercised	March 31, 2021	priceper warrant
April 21, 2021	2,337,760	-	2,337,760	$0.60
December 6, 2021	4,028,429	-	4,028,429	$0.60
December 3, 2021	13,226	(7,779)	5,447	$0.45
December 22, 2022	162,162	-	162,162	$1.48
	6,541,577	(7,779)	6,533,798	$0.62

The Company uses the Black-Scholes option pricing model to calculate the fair value of warrants issued for services. The model requires management to make estimates, which are subjective and may not be representative of actual results. Changes in assumptions can materially affect fair value estimates.

13. 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 key management personnel consists of executive and non-executive members of the Company’s Board of Directors and corporate officers.

Remuneration attributed to key management personnel is summarized as follows:

	Short term	Share-based
Three months ended March 31, 2021	compensation	compensation	Total
Expensed in the statement of loss and
comprehensive loss	$ 205,803	$ 249,730	$ 455,533
Capitalized to exploration and evaluation assets	71,078	9,099	80,177
	$ 276,881	$ 258,829	$ 535,710

	Short term	Share-based
Three months ended March 31, 2020	compensation	compensation	Total
Expensed in the statement of loss and
comprehensive loss	$ 135,897	$ 107,994	$ 243,891
Capitalized to explorationand evaluationassets	103,103	32,814	135,917
	$239,000	$140,808	$379,808

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

13. RELATED PARTY TRANSACTIONS (continued)

As of March 31, 2021, $448,627 (December 31, 2020 – $47,000) was included in accounts payable and accrued liabilities owing to directors and officers for compensation.

On August 10, 2020, NexGen acquired 4,411,764 common shares of the Company (see Note 12). NexGen also holds 3,685,929 warrants with an exercise price of $0.60 that expire on December 6, 2021. In April 2021, NexGen received 1,536,760 common shares on the exercise of 1,536,760 warrants with an exercise price of $0.60 that expired on April 19, 2021.

Up until March 31, 2020, the Company charged office lease and administrative expenditures to ICU, a company with common directors. During the three months ended March 31, 2020, office lease and administrative expenditures charged to ICU amounted to $26,533.

On February 15, 2021, the former Chief Executive Officer resigned and was paid $897,254 in accordance with the terms of his employment contract. This is excluded from the table above for the three months ended March 31, 2021.

14. CAPITAL MANAGEMENT

The Company manages its capital structure and adjusts it, based on the funds available to the Company, in order to support the acquisition, exploration and evaluation of assets. The Board of Directors does not impose quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain the future development of the business.

In the management of capital, the Company considers all types of equity and is dependent on third party financing, whether through debt, equity, or other means. Although the Company has been successful in raising funds to date, there is no assurance that the Company will be successful in obtaining required financing in the future or that such financing will be available on terms acceptable to the Company.

The properties in which the Company currently has an interest are in the exploration stage. As such the Company, has historically relied on the equity markets to fund its activities. The Company will continue to assess new properties and seek to acquire an interest in additional properties if it determines that there is sufficient geologic or economic potential and if it has adequate financial resources to do so.

Management reviews its capital management approach on an on-going basis and believes that this approach, given the relative size of the Company, is reasonable. The Company is not subject to externally imposed capital requirements. There were no changes in the Company’s approach to capital management during the period.

15. FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash, accounts receivable, accounts payable and accrued liabilities and Debentures.

Fair Value Measurement

The Company classifies the fair value of financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instrument:

• Level 1 – quoted prices 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 (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 – inputs for the asset or liability that are not based on observable market data.

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

15. FINANCIAL INSTRUMENTS (continued)

The fair values of the Company’s cash and cash equivalents, amounts receivable, accounts payable and accrued liabilities approximate their carrying value, due to their short-term maturities or liquidity.

The Debentures are re-measured at fair value at each reporting date with any change in fair value recognized in profit or loss, except the change in fair value that is attributable to change in credit risk is presented in other comprehensive income (Note 9). The Debentures are classified as Level 2.

Financial instrument risk exposure

As at March 31, 2021, the Company’s financial instrument risk exposure and the impact thereof on the Company’s financial instruments are summarized below:

(a) Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. As at March 31, 2021, the Company has cash on deposit with a large Canadian bank. Credit risk is concentrated as a significant amount of the Company’s cash and cash equivalents is held at one financial institution. Management believes the risk of loss to be remote.

The Company’s accounts receivable consists of input tax credits receivable from the Government of Canada and interest accrued on cash equivalents. Accordingly, the Company does not believe it is subject to significant credit risk.

(b) Liquidity Risk

Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet its obligations under financial instruments. The Company manages liquidity risk by maintaining sufficient cash balances. Liquidity requirements are managed based on expected cash flows to ensure that there is sufficient capital to meet short-term obligations. As at March 31, 2021, the Company had a working capital balance of $12,680,340, including cash of $13,354,634.

(c) 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.

(i) Interest Rate Risk

Interest rate risk is the risk that the future cash flows from a financial instrument will fluctuate due to changes in market interest rates. The Company holds its cash in bank accounts that earn variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on the estimated fair value of the Company’s cash and cash equivalent balances as of March 31, 2021. The interest on the Debentures is fixed and not subject to market fluctuations.

(ii)

Foreign Currency Risk

The functional currency of the Company is the Canadian dollar. The Company is affected by currency transaction risk and currency translation risk. Consequently, fluctuations of the Canadian dollar in relation to other currencies impact the fair value of financial assets, liabilities and operating results. Financial assets and liabilities subject to currency translation risk primarily include US dollar denominated cash and US dollar accounts payable and accrued liabilities and the Debentures. The Company maintains Canadian and US dollar bank accounts in Canada.

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ISOENERGY LTD. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (Unaudited) (Expressed in Canadian Dollars) FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

15. FINANCIAL INSTRUMENTS (continued)

The Company is exposed to foreign exchange risk on its US dollar denominated Debentures. At maturity the US$6 million principal amount of the Debentures is due in full, and prior to then at a premium upon the occurrence of certain events, including a change of control. The Company holds sufficient US dollars to make all cash interest payments due under the Debentures until maturity but not to pay the principal amount. Accordingly, the Company is subject to risks associated with fluctuations in the Canadian/US dollar exchange rate that may make the Debentures more costly to repay.

(iii) Price risk

The Company is exposed to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact of movements in individual equity prices or general movements in the level of the stock market on the Company’s financial performance. Commodity price risk is defined as the potential adverse impact of commodity price movements and volatilities on financial performance and economic value. Future declines in commodity prices may impact the valuation of long-lived assets. The Company closely monitors the commodity prices of uranium, individual equity movements, and the stock market.

16. SEGMENT INFORMATION

The Company operates in one reportable segment, being the acquisition, exploration and development of uranium properties. All of the Company’s non-current assets are located in Canada.

17. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

There was no cash paid for income tax in the three months ended March 31, 2021 and 2020.

Non-cash transactions in the three months ended March 31, 2021 and 2020 included:

• (a) A non-cash transaction of $33,730 (2020 – $60,852) related to share-based payments was included in exploration and evaluation assets.

18. SUBSEQUENT EVENT

• (a) Subsequent to March 31, 2021, 590,000 stock options and 2,482,226 warrants were exercised for proceeds of $1,954,266.

18