Marvel Discovery Corp. — Interim / Quarterly Report 2021

Jan 30, 2021

CALIFORNIA GOLD MINING INC.

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED NOVEMBER 30, 2020 AND 2019

(EXPRESSED IN CANADIAN DOLLARS)

(UNAUDITED)

Notice to Reader

The accompanying unaudited condensed interim condensed interim consolidated financial statements of California Gold Mining Inc. have been prepared by and are the responsibility of the Corporation’s management. The Corporation’s independent auditor has not performed a review of these unaudited condensed interim consolidated financial statements.

California Gold Mining Inc. Condensed Interim Consolidated Statements of Financial Position (Unaudited, expressed in Canadian Dollars)

	November 30	August 31
	2020	2020
ASSETS	$	$
Current assets
Cash	395,849	12,378
Amounts receivable	27,761	18,769
Inventory (note 11)	652,497	656,372
Prepaid expenses	107,851	113,556
Total current assets	1,183,958	801,075
Other assets
Property, plant and equipment (note 4)	7,303,961	7,415,295
Right-of-use asset(note 15)	191,350	203,563
Total assets	8,679,269	8,419,933
EQUITY AND LIABILITIES
Current liabilities
Amounts payable and other liabilities (note 9)	2,665,555	2,510,691
Secured Loan (note 12(i))	4,014,018	3,912,600
Subordinated Secured Loan (note 12 (ii))	448,082	-
Currentportion of Lease obligation(note 16)	41,795	39,915
Total current liabilities	7,169,450	6,463,206
Lease obligation(note 16)	162,263	174,121
Total liabilities	7,331,713	6,637,327
Equity
Share capital (note 5)	26,499,330	26,499,330
Reserves (note 10)	12,371,093	12,273,042
Accumulated other comprehensive (loss) income	(104,970)	(23,104)
Accumulated deficit	(37,417,897)	(36,966,662)
Total equity	1,347,556	1,782,606
Total equity and liabilities	8,679,269	8,419,933

The accompanying notes are an integral part of these condensed interim consolidated financial statements. Nature of operations and going concern (note 1) Commitments (notes 3,4, 2, 14) Subsequent events (note 17)

Approved on behalf of the Board:

Signed “Scott Rasenberg”, Director

Signed “Larry Phillips“, Director

• 1 -

California Gold Mining Inc. Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited, expressed in Canadian Dollars)

	Three months	ended
	November	30
	2020	2019
Operating expenses	$	$
Exploration and evaluation expenditures (note 3)	900	2,060
Investor relations	-	82,783
Property taxes	44,207	78,251
Professional fees	124,000	245,551
Salaries and wages	19,354	22,690
Management fees (note 9)	48,583	61,750
Occupancy costs	22,444	82,890
Share-based payments (note 6 and 9)	38,146	30,104
Shareholder information and compliance	11,125	34,678
Depreciation (note 4)	26,424	15,217
Right-of-use asset amortization (note 15)	12,213	-
Insurance	5,713	8,570
Other general and administrative	1,547	54,997
(Gain)Loss on foreign exchange	(23,519)	22,402
Total operating expenses	331,137	741,943
Loss before interest and other income and expenses	(331,137)	(741,943)
Interest, accretion and bank charges	(149,204)	(190,943)
Government Covid19 Rent Subsidy	29,106	-
Gain on fair value of biological assets	-	568,011
Net loss for the period	(451,235)	(364,875)
Other comprehensive loss for the period
Items that will be reclassified to profit or loss
Foreign exchange translation	(81,866)	7,744
Net comprehensive loss for theperiod	(533,101)	(357,131)
Basic and diluted net lossper share(note 7)	(0.01)	(0.01)
Weighted average number of common shares	65,108,269	60,253,563
(basic and diluted)

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

• 2 -

California Gold Mining Inc. Condensed Interim Consolidated Statements of Cash Flows (Unaudited, expressed in Canadian Dollars)

alifornia Gold Mining Inc. ondensed Interim Consolidated Statements of Cash Flows naudited, expressed in Canadian Dollars)
	Three months ended
	November 30, 2020	November 30, 2019
Operating activities	$	$
Net loss for the period	(451,235)	(364,875)
Adjustments for non-cash items:
Depreciation (note 4)	26,424	15,217
Amortization right of use asset (note 15)	12,213	-
Share-based compensation (note 6)	38,146	30,104
Accretion on secured loans	7,987	76,915
Gain on biological assets	-	(568,011)
Changes in non-cash working capital
HST recoverable, accrued interest and amounts receivable	(8,992)	(38,971)
Prepaid expenses	5,705	(725,805)
Inventory	3,875	(656,252)
Lease liability	(9,978)	-
Amountspayable and other liabilities	154,864	293,999
Net cash used in operating activities	(220,991)	(1,937,679)
Investing activity
Purchase ofproperty, plant and equipment(note 4)	-	(47,415)
Net cash used in investing activity	-	(47,415)
Financing activity
Issue of securities (note 5(i))	-	319,000
Secured loans netproceeds(repayment) (note 12)	500,000	1,968,703
Net cash provided by financing activity	500,000	2,287,703
Net change in cash and cash equivalents	279,009	302,609
Effect of foreign currency translation	104,462	11,911
Cash, beginning of the period	12,378	69,632
Cash, end of the period	395,849	384,152

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

Supplemental information:

Warrants issued in Subordinated Secured Loan Financing (Note 12(ii)) $ 59,905 $ Nil

• 3 -

California Gold Mining Inc. Condensed Interim Consolidated Statements of Changes in Equity (Unaudited, expressed in Canadian Dollars)

				Accumulated
				other
	Number of	Share	Reserves	comprehensive Accumulated
	shares	capital	(note 10)	income(loss)	deficit	Total equity
	#	$	$	$	$	$
Balance, August 31, 2019	59,771,519	25,374,837	12,071,030	116,936	(30,278,966)	7,283,837
Exercise of warrants (note 5 (i))	638,00	319,000	-	-	-	319,000
Value from exercise of warrants	-	61,596	(61,596)	-	-	-
Share-based payments (note 6)	-	-	30,104	-	-	30,104
Net loss and comprehensive loss for the period	-	-	-	7,744	(364,875)	(357,131)
Balance, November 30, 2019	60,409,519	25,755,433	12,039,538	124,680	(30,643,841)	7,275,810
Private placement (note 5 (ii))	4,698,750	751,800	-	-	-	751,800
Share issue costs	-	(7,903)	-	-	-	(7,903)
Share-based payments (note 6)	-	-	233,504	-	-	233,504
Net loss and comprehensive loss for theperiod	-	-	-	(147,784)	(6,322,821)	(6,470,605)
Balance, August 31, 2020	65,108,269	26,499,330	12,273,042	(23,104)	(36,966,662)	1,782,606
Value of warrants issued with secured loan (note 12(ii))	-	-	59,905	-	-	59,905
Share-based payments (note 6)	-	-	38,146	-	-	38,146
Net loss and comprehensive loss for the period	-	-	-	(81,866)	(451,235)	(533,101)
Balance, November 30, 2020	65,108,269	26,499,330	12,371,093	(104,970)	(37,417,897)	1,347,556

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

• 4 -

California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

1. Nature of operations and going concern

California Gold Mining Inc. (“California Gold” or the “Corporation”) was continued to the Business Corporations Act (Ontario) from the Business Corporations Act (Alberta) where the Corporation was initially incorporated on September 17, 1998. On March 25, 2019, the Company’s common shares began trading under symbol "CGM" on the Canadian Stock Exchange and ceased trading on the TSX Venture Exchange. The Corporate office is located in the C/O Norton Rose Fulbright Canada LLP, 45 O'Connor Street, Suite 1500, Ottawa, ON K1P 1A4, Canada .

On January 29, 2010, the Corporation acquired the Dingman Property and became a junior exploration company engaged in the acquisition, exploration and development of mineral resource properties. On March 1, 2013, the Corporation purchased a fee simple interest (subject to a 3% net smelter royalty) in approximately 3,351 acres of land located 15 miles north of the town of Mariposa, California which the Corporation now refer to as the Fremont Property (note 3(b)). The Corporation has not earned any income from mining operations.

For the three months ended November 30, 2020, the Corporation incurred a loss of $451,235 and had an accumulated deficit of $37,417,897. As at November 30, 2020, the Corporation had a working capital deficit of $5,985,492. These factors indicate the existence of material uncertainties that cast significant doubt regarding the Corporation's ability to continue as a going concern. In order to meet future obligations and cover administrative costs, the Corporation needs to raise additional capital. These condensed interim consolidated financial statements have been prepared on the assumption that the Corporation will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. The condensed interim consolidated financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Corporation be unable to continue operations. Any adjustment may be material.

COVID 19 Pandemic

The Company is subject to various market, political and regulatory trends as a result of the COVID-19 situation and additional business and financial risks that result therefrom. The duration of the COVID-19 outbreak and the resultant travel restrictions, social distancing, Government response actions, business closures and disruptions, can all have an impact on the Issuer’s operations and access to capital. There can be no assurance that the Issuer will not be impacted by adverse consequences that be brought about by the COVID-19 pandemic on global financial markets, share prices and financial liquidity and that severely limit the financing capital available to the Company.

2. Significant accounting policies

(a) Statement of compliance

These condensed interim consolidated financial statements of the Corporation have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting ("IAS 34") as issued by the International Accounting Standards Board ("IASB") and using the accounting policies the Corporation reported in Note 2 in its audited annual consolidated financial statements for the year ended August 31, 2020. These condensed interim consolidated financial statements do not include all of the information required for full annual financial statements.

The accounting policies have been applied consistently to all periods presented in these condensed interim consolidated financial statements.

The condensed interim consolidated financial statements were authorized by the Board of Directors on January 29, 2021.

• 5 -

California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

(b) Basis of presentation

These condensed interim consolidated financial statements are presented in Canadian dollars. The condensed interim consolidated financial statements are prepared on the historical cost basis and on an accrual basis, except for cash flow information.

The preparation of the condensed interim consolidated financial statements requires management to make judgments, estimates, and assumptions that affect the application of policies and reported amounts of assets and liabilities, and income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

(c) Basis of consolidation

The condensed interim consolidated financial statements include the accounts of the Corporation and its100% owned subsidiaries: Washmax (Weston) Ltd, California Gold Mines (US) Inc., Fremont Gold Mining LLC. and CGM Farm Management LLC. All significant intercompany transactions and balances have been eliminated upon consolidation. Accounting policies of subsidiaries are consistent with those of the Company.

Subsidiaries consist of entities over which the Corporation is exposed to, or has rights to, variable returns as well as the ability to affect those returns through the power to direct the relevant activities of the entity. Subsidiaries are fully condensed interim consolidated from the date control is transferred to the Company and are decondensed interim consolidated from the date that control ceases. The financial statements include all the assets, liabilities, revenues, expenses and cash flows of the Company and its subsidiaries after eliminating inter-entity balances and transactions.

(d) Adoption and Future Accounting Pronouncements

Future accounting policies

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2020 or later periods. Many are not applicable or do not have a significant impact to the Company and have been excluded. The following have not yet been adopted and are being evaluated to determine their impact on the Company.

IFRS 10 – Consolidated Financial Statements (“IFRS 10”) and IAS 28 – Investments in Associates and Joint Ventures (“IAS 28”) were amended in September 2014 to address a conflict between the requirements of IAS 28 and IFRS 10 and clarify that in a transaction involving an associate or joint venture, the extent of gain or loss recognition depends on whether the assets sold or contributed constitute a business. The effective date of these amendments is yet to be determined, however early adoption is permitted.

• 6 -

California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

(e) Significant estimates and assumptions

Significant Accounting Judgments, Estimates and Assumptions

The preparation of these condensed interim consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. These condensed interim consolidated financial statements include estimates, which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the condensed interim consolidated financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised, on a prospective basis. The revision may affect current or both current and future periods.

Information about critical judgments and estimates in applying accounting policies, and areas where assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following areas:

• Mineral resource estimates

• Estimation of decommissioning and reclamation costs and the timing of expenditure

• • Share-based payments and warrants

• Income taxes and recoverability of potential deferred tax assets

• • Income, value added, withholding and other taxes

3. Exploration and evaluation expenditures

a) Dingman Property:

The Company acquired its interest in the Dingman Property from Opawica Explorations Inc. (“Opawica”) on January 29, 2010 pursuant to an option agreement dated July 31, 2009 between the Company and Opawica that transferred all of Opawica’s interest in the Dingman Property to the Company, subject to an existing net smelter royalty.

Costs incurred on the mineral interests for the Dingman Property for the three months ended November 30, 2020 and 2019 are summarized as follows:

019 are summarized as follows:
	2020		2019
Exploration costs	$900	$	1,747

b) Fremont Property

On March 1, 2013, the Corporation completed the acquisition of a fee simple interest (subject to a 3% net smelter royalty) of 3,351 acres of land in Mariposa County, California known as the Fremont Property. The purchase was completed through the Corporation's wholly owned subsidiary, Fremont Gold Mining LLC. The purchase price included allocation to land and building (Note 4).

Costs incurred on the fee simple interest for the Fremont Property for the three months ended November 30, 2020 and 2019 are summarized as follows:

019 are summarized as follows:
		2020		2019
Exploration and development expenditures	$	Nil	$	313

• 7 -

California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

4. Property, plant and equipment

	Furniture
	and	Leasehold	Computer	Computer		Field
Cost	Fixtures	improvements	equipment	Software	Vehicles	equipment	Building	Land	Total
	$	$	$	$	$	$	$	$	$
Balance, August 31, 2019	14,416	8,927	20,117	19,188	94,299	433,813	233,350	7,290,281	8,114,391
Addition	5,045	-	-	-	-	48,261	-	-	53,306
Write-down (note 15)	-	-	-	-	-	-	-	(250,000)	(250,000)
Effect of foreign exchange
adjustment	(67)	-	(143)	(128)	162	364	(4,441)	(104,491)	(108,744)
Balance, August 31, 2020	19,394	8,927	19,974	19,060	94,461	482,438	228,909	6,935,790	7,808,953
Addition	-	-	-	-	-	-	-	-	-
Effect of foreign exchange
adjustment	(20)	-	-	-	(2,503)	(13,529)	(1,351)	(72,947)	(90,350)
Balance, November 30, 2020	19,374	8,927	19,974	19,060	91,958	468,909	227,558	6,862,843	7,718,603
	Furniture
	and	Leasehold	Computer	Computer		Field
Accumulated depreciation	Fixtures	improvements	equipment	Software	Vehicles	equipment	Building	Land	Total
	$	$	$	$	$	$	$	$	$
Balance, August 31, 2019	9,457	8,927	17,063	16,950	14,406	107,618	72,124	-	246,545
Depreciation	2,327	-	3,079	2,247	20,135	107,528	8,858	-	144,174
Effect of foreign exchange
adjustment	(79)	-	(168)	(137)	4,294	(2,187)	1,216		2,939
Balance, August 31, 2020	11,705	8,927	19,974	19,060	38,835	212,959	82,198	-	393,658
Depreciation	383	-	-	-	3,360	19,791	2,890	-	26,424
Effect of foreign exchange
adjustment	(20)	-	-	-	(176)	(4,713)	(531)		(5,440)
Balance, November 30, 2020	12,068	8,927	19,974	19,060	42,019	228,037	84,557	-	414,642
	Furniture	Leasehold	Computer	Computer		Field
Net carrying value	and Fixtures	improvements	equipment	Software	Vehicles	equipment	Building	Land	Total
	$	$	$	$	$	$	$	$	$
August 31, 2020	7,689	-	-	-	55,626	269,479	146,711	6,935,790	7,415,295
November 30, , 2020	7,306	-	-	-	49,939	240,872	143,001	6,862,843	7,303,961

Depreciation included in the value of inventory for the year ended August 31, 2020 was $87,113. For the period ended November 30, 2020, all depreciation is expensed and not capitalized to inventory.

Purchase of Illinois land Package

On July 17, 2019, the Company announced that it had completed the purchase of a private 82.42-acre contiguous parcel of agricultural farm land in Kendall County, Illinois (the “Grove Road Farm”). On December 10, 2020, subsequent to November 30, 2020, the land was sold. An impairment charge of $250,000 was recorded for the year ended August 31, 2020 to reduce the carrying value to its net realizable value. See Subsequent Event note 17.

• 8 -

California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

5. Share capital

a) Authorized share capital

Unlimited number of voting common shares Unlimited number of non-voting first preferred shares- none issued. Unlimited number of non-voting second preferred shares- none issued.

b) Equity activity

• (i) In September 2019, 638,000 warrants were exercised for gross proceeds of $319,000 which resulted in issuance of 638,000 common shares. The value adjustment from the exercise of warrants was $61,596 which increased the share capital and decreased warrant reserves.

• (ii) On May 21, 2020, June 21, 2020 and June 29, 2020, the Corporation completed three tranches of a non-brokered private placement where it issued an aggregate of 4,698,750 common shares at $0.16 per common share for gross proceeds of $751,800.

6. Stock options

On May 14, 2018, the shareholders of the Corporation approved an amendment to its stock option plan (the “Plan”) whereby the Corporation is authorized to grant options to purchase up to 10% of the issued and outstanding shares of the Corporation to directors, senior officers, full time employees and/or consultants of the Corporation. The terms of the awards under the Plan are determined by the Board of Directors.

	Number of	Weighted average
	stock options	exercise price$)
Balance, August 31, 2019	5,000,000	0.53
Granted(i)	250,000	0.50
Balance, August 31, 2020 and November 30, 2020	5,250,000	0.53

The following table reflects the actual stock options issued and outstanding as of November 30, 2020:

			Weighted average
			remaining
Expiry date	Exercise	Options	contractual	Options	Grant date
	price ($)	outstanding	life (yrs)	exercisable	fair value ($)
July 27, 2021	0.75	560,000	0.65	560,000	325,400
March 30, 2022	0.75	120,000	1.33	120,000	45,600
November 30, 2023	0.50	4,320,000	3.00	4,320,000	1,135,296
April 22,2025	0.50	250,000	4.39	83,333	32,244
	0.53	5,250,000	2.78	5,083,333	1,538,540

(i) On April 23, 2020, the Corporation granted 250,000 options to a consultant of the Corporation. Each option is exercisable into one common share at an exercise price of $0.50, vest over a period of two years and has a term of five years. The fair value of the stock options has been determined to be $32,244 using the Black-Scholes option pricing model based on the following assumptions: risk free interest rate of 0.45%, expected dividend yield of 0%, expected stock volatility of 120%, stock price at grant date of $0.18 and expected life of 5 years.

• 9 -

California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

7. Net loss per common share

The calculation of basic and diluted loss per share for the three months ended November 30, 2020 was based on the net loss attributable to common shareholders of $451,235 (2019 - $364,875) and the weighted average number of common shares outstanding of 65,108,269 (2019 – 60,253,563). Diluted loss per share did not include the effect of stock options and warrants as they are anti-dilutive.

8. Warrants

Warrants
	Number of warrants	Grant date fair value, net of issuance costs ($)
Balance, August 31, 2019	7,710,405	1,193,785
Expired	(6,772,405)	(1,012,658)
Exercised(note 5 b(i))	(638,000)	(61,596)
Balance, August 31, 2020	300,000	119,531
Issued(Note 12(ii))	600,000	59,905
Balance, November 30, 2020	900,000	179,436

The following table reflects the actual warrants issued and outstanding as of November 30, 2020:

			Grant Date fair value,
	Exercise	Warrants	net of issuance costs
Expiry date	price($)	outstanding	($)
July 17, 2021 (note 12(i))	0.50	300,000	119,531
November 6, 2022(note 12(ii))	0.15	600,000	59,905
		900,000	179,436

The grant date fair values of the warrants issued during the three months ended November 30, 2020 were estimated using the Black-Scholes option pricing model with the following assumptions:

	Three months
	ended
	November 30, 2020
Risk free interest rate	0.16%
Expected dividend yield	Nil
Expected volatility	145%
Stock price	$0.145
Expected life	2 years

Option pricing models require the input of subjective assumptions regarding the expected volatility. Changes in assumptions can materially affect the estimate of fair value, and therefore, use of Black-Scholes option pricing model does not provide a realistic measure of the fair value of the Corporation’s warrants at the date of issue.

• 10 -

California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

9. Related party balances and transactions

Related parties include the Board of Directors, officers, close family members and enterprises which are controlled by these individuals as well as certain persons performing similar functions. In accordance with International Accounting Standards 24 Related Party Disclosure, key management personnel are those having authority and responsibility for planning, directing and controlling the activities of the Corporation directly or indirectly, including any directors (executive and non-executive) of the Corporation.

Remuneration of key management personnel of the Corporation was as follows:

	Three months ended	Three months ended
	November 30, 2020	November 30, 2019
Short-term benefits	50,583	$ 69,750
Share based payments	31,622	30,104
	$82,205	$99,890

As at November 30, 2020, the Corporation owed key management personnel $25,671 (2019 - Nil) which is included in amounts payable and other liabilities. These amounts are unsecured, non-interest bearing with no fixed terms of repayment.

See Subordinated Secured Loan Note 12 (ii) – R.W. Tomlinson

10. Reserves

As of:	November 30, 2020	August 31, 2020
Warrants	$ 179,436	$ 119,531
Broker warrants	-	-
Contributed surplus	12,191,657	12,153,511
	$12,371,093	$12,273,042

11. Inventory

Inventory assets consist of the following:

	Carrying Value
Harvested hemp	$72,494
Finished goods purchased bio mass	583,878
Balance August 31, 2020	$656,372
Foreign exchange translation	(3,875)
Balance, November 30, 2020	652,497

During 2020, a write down of inventory by $3,704,832 to net realizable value, less costs to sell, was recorded as a result of the decreasing prices of CBD. The net realizable value was estimate by management considering current potential market outcomes and transaction prices.

For the three months ended November 30, 2020, the decrease in the value of inventory, is due to the change in foreign current rates between August 31, 2020 and November 30, 2020 which resulted in a decrease in value of $3,875 for a balance of $652,497 as at November 30, 2020.

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California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

12. Secured Loan

(i) Secured Loan – Romspen Investment Corporation ( “Romspen”)

On July 17, 2019, the Corporation secured from a Toronto-based alternative credit firm Romspen for a US $3.0 million credit facility. The credit facility is secured by a first lien against, including related land and buildings, the Fremont Property. The initial advance of the loan was closed on July 17, 2019 of $US1.5million.

On September 24, 2019 the Corporation announced that it had completed the second advance for US$1.5 million of the total US$3.0 million credit facility Romspen. The terms of the second advance are substantially similar to the first advance except that the Grove Farm (See Note 4 – Property, Plant Equipment and Note 17 Subsequent Event ) was included in the property used for security of the loan.

The Corporation has taken the option to extend the maturity date of the secured loan. The loan is now due on July 31, 2021.

The principal terms of the credit facility are as follows:

• 12.0% per annum rate of interest

• Initial 12-month term with an additional 12-month extension at California Gold’s option which has now been exercised;

• Interest-only payments which will begin on the earlier of (a) November 1, 2019, and (b) the date California Gold achieves positive cash flow from operations;

• California Gold can pre-pay the entire principal amount upon providing Romspen with one month’s written notice;

• The facility is secured by a first lien on the Company’s Fremont Property in California and Grove Farm in Illinois; and

• California Gold has issued Romspen 300,000 common share purchase warrants with an exercise price of $0.50 and an expiration date 24 months from the date of issuance.

The fair value of the common share purchase warrants was determined by reference to the fair market value of the warrants issued in connection with the Secured Loan financing with an aggregate value of $119,531. Each warrant entitles the holder to purchase one common share at an exercise price of $0.50 for a period of 2 years from the date of issue. The aggregate value of the transaction costs which includes legal fees and other professional fees, and the warrants is recorded against the secured loan and is being amortized over the life of the loan. See Note 8 -Warramts.

	November 30	August 31
	2020	2020
	$	$
Face value of Secured loan US$	$ 3,000,000	$ 3,000,000
Value of Interest added ( ii)	96,042
Foreign exchange impact
converting loan to $CDN	917,976	912,600
Transaction costs allocated to debentures	(307,654)	(307,654)
Accumulated accretion	307,654	307,654
Balance, end ofperiod	$ 4,014,018	$ 3,912,600

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California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

ii) Subordinated Secured Loan – R.W. Tomlinson Limited

On November 6, 2020, the Company entered into a subordinated secured credit facility (the “Subordinated Secured Loan”) with R.W. Tomlinson Limited on the following principal terms: a principal amount of up to $1,000,000, advanced in two $500,000 tranches, the first immediately and the second if certain conditions are met at the beginning of January 2021, interest accrues at 14% per annum and is paid at maturity which will is April 6, 2021. Warrants were issued to the subordinated lender to purchase 300,000 common shares at an exercise price of $0.15 for a period of 2 years from the date of issue. The first tranche of the Subordinated Secured Loan has been received by the Company.

In connection with the above financing, Romspen, the Company’s existing senior lender, consented to the new financing and agreed to forbear on any enforcement in connection with the missed interest payments under the senior facility for September, October and November 2020, totaling US$96,042, and added those outstanding amounts to the amounts to be repaid on the maturity date in exchange for the issuance of warrants to purchase 300,000 common shares at an exercise price equal to $0.15 for a period of 2 years from the date of issue

The fair value of the common share purchase warrants was determined by reference to the fair market value of the 600.000 warrants issued in connection with the Subordinated Secured Loan financing with an aggregate value of $59,905. Each warrant entitles the holder to purchase one common share at an exercise price of $0.15 for a period of 2 years from the date of issue. The value of the warrants is recorded against the secured loan and is being amortized over the life of the loan.

	November 30
	2020
	$
Opening Balance , September 1 2020	-
Face value of loan	500,000
Value of warrants issued	(59,905)
Accumulated accretion	7,987
Balance, November 30, 2020	448,082

13. Financial Instruments and capital management

The Corporation is exposed in varying degrees to a variety of financial instrument related risks.

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Corporation’s primary exposure to credit risk is on its cash held in its bank account. The majority of cash is held in a bank account with a major bank in Canada. As the Corporation’s cash is held by one bank there is a concentration of credit risk. This risk is managed by using major banks that are high credit quality financial institutions as determined by rating agencies.

Liquidity risk

As at November 30, 2020, the Corporation had a cash balance of $395,849 (August 31, 2020 - $12,378) to settle current liabilities of $7,169,450 (August 31, 2020 - $6,463,206). The Corporation does not have sufficient cash reserves to fund its administrative costs and fully fund all project development initiatives for the coming twelve-month period and to repay its liabilities to trade creditors and debt holders. Historically, the Corporation's source of funding has been the issuance of equity securities for cash primarily through private placements as well as a loan facility. The Corporation’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.

All of the Corporation’s financial liabilities as at November 30, 2020 are due within one year of the financial period end date.

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California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

Foreign exchange risk

Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The Corporation’s subsidiaries located in the United States of America (“USA”) are exposed to currency risk as it incurs expenditures that are denominated in USA dollars (“US$”), which is the currency in the USA. The Corporation does not hedge its exposure to fluctuations in foreign exchange rates.

The following is an analysis of Canadian dollar equivalent of financial assets and liabilities that are denominated in US$:

	November 30	August 31
	2020	2020
Cash and cash equivalents	$ 4,720	$ 2,109
Accounts payable and other liability	(1,993,357)	(211,683)
Secured loan	(4,014,018)	(3,912,600)
Net Exposure	$ (6,012,095)	$ (4,123,308)

Based on the above net exposures, as at November 30, 2020, a 10% change in the US$ exchange rate would impact the Corporation’s net loss by $601,209 (August 31. 2020 – ($412,331)).

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. At November 30, 2020, the Corporation has financial instruments recorded that bear interest at fixed rates of interest and therefore interest rate risk is not considered significant.

Classification of financial instruments

Financial assets included in the statement of financial position are as follows. All of the financial assets are reflected at amortized costs:

mortized costs:
	November 30	August 31
	2020	2020
Financial assets at amortized cost:
Cash	$395,849	$12,378
Amount receivables	$27,761	$18,769

Financial liabilities included in the statement of financial position are as follows. All of the financial liabilities are reflected at amortized cost:

amortized cost:
	November 30	August 31
	2020	2020
Financial liabilities at amortized cost:
Amounts payable and other liabilities	$2,665,555	$2,510,691
Secured loan	$4,014,018	$3,912,600
Subordinate Secured loan	$448,082	Nil
Lease liability	204,058	214,036

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California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

Fair value

The condensed interim consolidated statements of financial position carrying amounts for cash, amounts receivable, accounts payable and other liabilities and secured loan, approximate fair value due to their short-term nature.

The following provides a description of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Cash and other receivables fall under Level 1. Biological assets in 2019 were level 3 and then in 2020 the value was transferred to inventory. Other than inventory, there were no transfers between levels during the period.

Capital Management

The Corporation’s policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain future development of the business. The capital structure of the Corporation consists of share and working capital. There were no changes in the Corporation’s approach to capital management during the year and the Corporation is not subject to any externally imposed capital requirements.

14. Commitment and Contingencies

Although the Company has taken steps to verify title to the properties on which it is conducting exploration and in which it has an interest, in accordance with industry standards for the current stage of operations of such properties, these procedures do not guarantee the Company's title. Property title may be subject to government licensing requirements or regulations, social licensing requirements, unregistered prior agreements, unregistered claims, aboriginal claims, and non-compliance with regulatory, environmental and social requirements. The Company’s assets may also be subject to increases in taxes and royalties, renegotiation of contracts, and political uncertainty.

The businesses of hemp farming and mining and exploring for minerals involves a high degree of risk and there can be no assurance that current exploration programs will result in profitable operations. The Company's continued existence is dependent upon the preservation of its interests in the underlying properties, the achievement of profitable operations, or the ability of the Company to raise additional financing, if necessary, or alternatively upon the Company's ability to dispose of its interests on an advantageous basis. Underlying royalties on the Company’s exploration and evaluation assets are described in Note 3.

The Company’s farming and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.

From time to time, the Corporation is named as a party to claims or involved in proceedings, including legal, regulatory and tax related, in the ordinary course of its business. While the outcome of these matters may not be estimable at the period end, the Corporation makes provisions, where possible, for the estimated outcome of such claims or proceedings. Should a loss result from the resolution of any claims or proceedings that differs from these estimates, the difference will be accounted for as a charge to net income (loss) in that period.

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California Gold Mining Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three months ended November 30, 2020 and 2019 (Unaudited, expressed in Canadian Dollars)

15. Right of Use Assets

Right of use assets consists of office space amortized over 5 years. The table below reports the activity for the year ended August 31, 2020 and three months ended November 30, 2020.

	November 30		August 31
	2020		2020
	$		$
Balance, beginning of period	203,563	-
Additions	-		244,275
Amortization	(12,213)		(40,712)
Balance,November 30,2020	191,350		203,563

16. Lease obligation

At the commencement date of the lease, the lease liability was measured at the present value of the lease payments that were not paid at that date. The lease payments are discounted using an interest rate of 12%, which is the Company's estimated incremental borrowing rate. The lease liability relates to an office premise. The continuity of the lease liabilities are presented in the table below:

	November 30	August 31
	2020	2020
	$	$
Balance, beginning of period	214,036	$244,275
Leasepayments	(9,978)	(30,239)
Balance, November 30, 2020	204,058	214,036
Less currentportion of lease obligation	41,795	39,915
Longtermportion of lease obligations	162,263	174,121

17. Subsequent Events

Sale of Grove Farm

On December 10, 2020, the Company completed the sale of the Grove Farm for gross proceeds of US$659,360. The net proceeds form the sale of the land was used to repay a portion of the secured Loan to Romspen . Since net gross proceeds from the sale of the land was less than the capitalized cost of the land, the Company has reflected a write down in the value the land by $250,000 to its net realizable value for the year ended August 31, 2020 based on the proceeds it received on the December 10, 2020 sale, as the impairment, was assessed to have existed as at August 31, 2020. No further adjustment was recorded for the three months ended November 30, 2020.

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