Nickel North Exploration Corp. — Interim / Quarterly Report 2021

Aug 27, 2021

==> picture [170 x 79] intentionally omitted <==

NICKEL NORTH EXPLORATION CORP.

CONDENSED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Unaudited –Prepared by Management)

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL REPORT

The accompanying unaudited interim financial report of the Company has been prepared by and is the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of this financial report in accordance with securities legislation and the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity’s auditor.

NICKEL NORTH EXPLORATION CORP.

CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION AS AT JUNE 30, 2021 AND DECEMBER 31, 2020

(Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

AS AT JUNE 30, 2021 AND DECEMBER 31, 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)
		June 30,	December 31,
	Note	2021	2020
			(Audited)
ASSETS
Current assets
Cash and cash equivalents	4	$ 36,892	$ 51,894
Sales tax recoverable and other receivables		9,351	5,201
Prepaid expenses and deposits		5,716	5,716
Restricted cash	5	28,750	28,750
Total current assets		80,709	91,561
Equipment	6	5,500	5,500
Exploration and evaluation assets	7	10,751,016	10,748,216
Total assets		$ 10,837,225	$ 10,845,277
LIABILITIES AND EQUITY
Current liabilities
Accounts and other payables	8/10	$ 366,484	$ 393,325
Loanpayable	10	1,425,435	1,257,293
Total current liabilities		1,791,919	1,650,618
Government loan	13	60,000	40,000
Deferred income tax liabilities		11,152	11,152
Total liabilities		1,863,071	1,701,770
Equity
Share capital	9	11,101,459	11,101,459
Contributed surplus		736,112	736,112
Deficit		(2,863,417)	(2,694,064)
Total equity		8,974,154	9,143,507
Total liabilities and equity		$ 10,837,225	$ 10,845,277

Going concern (Note 2)

The financial statements were approved and authorized for issue by the board of directors on August 27, 2021 and were signed on behalf by:

“Jingbin Wang” Director	“Yingting Guo”
	Director

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

NICKEL NORTH EXPLORATION CORP.

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

==> picture [497 x 103] intentionally omitted <==

==> picture [497 x 103] intentionally omitted <==

==> picture [497 x 103] intentionally omitted <==

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

NICKEL NORTH EXPLORATION CORP. CONDENSED STATEMENTS OF CHANGES IN EQUITY (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

==> picture [621 x 84] intentionally omitted <==

==> picture [621 x 83] intentionally omitted <==

==> picture [621 x 84] intentionally omitted <==

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

NICKEL NORTH EXPLORATION CORP.

CONDENSED INTERIM STATEMENTS OF CASH FLOWS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

==> picture [487 x 115] intentionally omitted <==

==> picture [487 x 115] intentionally omitted <==

==> picture [487 x 114] intentionally omitted <==

==> picture [487 x 115] intentionally omitted <==

Supplemental cash flow information (Note 12)

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

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

NICKEL NORTH EXPLORATION CORP.

1. NATURE OF BUSINESS

Nickel North Exploration Corp. (the “Company”) was incorporated under the laws of British Columbia, Canada on February 27, 2007 as Orient Ventures Capital Inc. and changed its name to Nickel North Exploration Corp. on July 30, 2012. The Company maintains its registered and head office at Suite 890, 580 Hornby Street, Vancouver, British Columbia, Canada, V6C 2E7.

The Company is currently engaged in the acquisition, exploration and evaluation of mineral property interests in Canada. The Company’s common shares are listed on the TSX Venture Exchange (TSX-V) under the symbol “NNX”.

2. BACKGROUND AND BASIS OF PREPARATION

Basis of preparation

These condensed interim financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by International Accounting Standard Board (“IASB”), applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34 Interim Financial Reporting . The condensed interim financial statements do not include all of the disclosures required for a competed set of annual financial statements and should be read in conjunction with the annual financial statements for the year ended December 31, 2020, which have been prepared in accordance with IFRS as issued by the IASB.

Basis of measurement

These financial statements have been prepared on a historical cost basis except for certain financial instruments that are measured at fair values. In addition these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

Functional and presentation currency

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

Going concern

The Company is an exploration stage company. At present, the Company’s operations do not generate cash flow. As at June 30, 2021, the Company had a working capital deficiency of $1,711,210 and an accumulated deficit of $2,863,417. The continuing operations of the Company are dependent upon its ability to raise adequate financing and to commence profitable operations in the future. Although the Company has been successful in raising funds in the past, there is no assurance that it will be able to obtain adequate financing in the near future, which raises material uncertainty and may cast significant doubt about the Company’s ability to continue as a going concern. The directors, after reviewing the current cash position and having considered the Company’s ability to raise funds in the short term, believe that the going concern basis is appropriate in preparing its financial statements.

These condensed financial statements do not include adjustments that would be required if going concern was not deemed an appropriate basis for preparation of the financial statements. These adjustments could be material.

NICKEL NORTH EXPLORATION CORP.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

2. BACKGROUND AND BASIS OF PREPARATION (continued)

Use of estimates and judgements

The preparation of the financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.

Actual results could differ from these estimates. Significant areas requiring the use of management estimates and judgments include:

• i) The assessment of indications of impairment for exploration and evaluation assets and the measuring of the recoverable amount when impairment tests have been prepared involve judgment and estimates.

• ii) The determination of deferred income tax assets or liabilities requires judgment regarding future income tax rates and the likelihood of utilizing tax carry-forwards and temporary differences. Changes in these assumptions could materially affect the recorded amounts, and therefore do not necessarily provide certainty as to their recorded values.

• iii) The assessment of the Company’s ability to continue as a going concern involves judgment regarding future funding available for its exploration projects and working capital requirements.

iv) The recognition of provisions for restoration, rehabilitation and environmental obligations.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Covid-19

During the year, there was a global outbreak of COVID-19 (coronavirus), which has had a significant impact on businesses through the restrictions put in place by the Canadian, provincial and municipal governments regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown the extent of the impact the COVID-19 outbreak may have on the Company as this will depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place by Canada and other countries to fight the virus. Due to this outbreak, the Company was not able to do exploration work and became relatively inactive during 2020 and the first and second quarters of 2021.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these condensed financial statements.

Cash and cash equivalents

Cash and cash equivalents consist of cash held at banks. There’s no cash equivalents as of June 30, 2021.

Restricted cash

Restricted cash consist of term deposit held as collateral for corporate credit card.

NICKEL NORTH EXPLORATION CORP. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Equipment

Equipment is recorded at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of equipment consists of the purchase price, any costs directly attributable to bringing the asset into operation and an initial estimate of any rehabilitation obligation. Depreciation of the equipment is calculated using the straight line basis, net of any estimated residual value, over their estimated useful lives. Computer equipment is depreciated over 10 years.

An item of equipment is derecognized upon disposal, when held for sale or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal of the asset, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in the statement of comprehensive loss. The Company conducts an annual assessment of the residual balances, useful lives and depreciation methods being used for equipment and any changes arising from the assessment are applied by the Company prospectively.

Exploration and evaluation assets

Once a license to explore an area has been secured, all direct costs related to the acquisition, exploration and evaluation of mineral property interests are capitalized into intangible exploration and evaluation assets on a property by property basis until such time that technical feasibility and commercial viability of extracting a mineral resource has been determined for a property, in which case the capitalized exploration and evaluation costs that give rise to future economic benefits are transferred and capitalized into property, plant and equipment. The Company records expenditures on exploration and evaluation activities at cost. Government tax credits received are recorded as a reduction to the cumulative costs incurred and capitalized on the related property.

Proceeds received from a partial sale or option of any interest in a property is credited against the carrying value of the property. When the proceeds exceed the carrying costs, the excess is recorded in profit or loss in the period the excess is received. When all of the interest in a property is sold, subject only to any retained royalty interests which may exist, the accumulated exploration and evaluation costs are written-off, with any gain or loss included in profit or loss in the period the transfer takes place. No initial value is assigned to any retained royalty interest. A royalty interest is subsequently assessed for value by reference to developments on the underlying mineral property.

Impairment of non-financial assets

Management assesses the exploration and evaluation assets and equipment for indicators of impairment at each statement of financial position date or whenever events or conditions indicate that its carrying amount may not be recoverable. If, after management review, it is determined that there are events or conditions that indicate the carrying amount of an asset is impaired, that asset is written down to its estimated recoverable amount. The recoverable amount of an asset is determined as the higher of its fair value less costs to sell and its value in use. 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 assets. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognized. A reversal of an impairment loss is recognized immediately in profit or loss.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

NICKEL NORTH EXPLORATION CORP.

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Provision for decommissioning and restoration obligations

The Company recognizes provisions for statutory, contractual, constructive or legal obligations associated with the reclamation of mineral properties in the year in which it is probable that an outflow of resources will be required to settle the obligation and when a reliable estimate of the amount can be made. Initially, a provision for a decommissioning liability is recognized based on expected future cash flows required to settle the obligation and discounted at a pre-tax rate specific to the liability. Such costs arise from the decommissioning of site preparation work, discounted to their net present value which is capitalized to the carrying amount of the asset. The capitalized amount is depreciated on the same basis as the related asset. Following the initial recognition of the decommissioning liability, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the current market-based discount rate and the amount or timing of the underlying cash flows needed to settle the obligation. The increase in the provision due to passage of time is recognized as interest expense. Significant judgments and estimates are involved in forming expectations of the amounts and timing of future closure and reclamation cash flows. As at June 30, 2021 and 2020, the Company has no known restoration, rehabilitation or environmental liabilities related to its mineral properties.

Government assistance

Mining tax credits and mining duties are recorded in the year of receipt. Quebec mining exploration tax credits for certain exploration expenditures incurred in Quebec are treated as a reduction of the exploration and evaluation costs of the respective mineral property.

Government grants

Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions attaching to them and that the amounts will be received.

Government grants toward current expenses are recognized in profit or loss for the period as other income.

Government grants towards expenses of future accounting periods are deferred and recognized in income as related expenses are incurred.

The CEBA loans received during 2020 and 2021 are recorded as non-current liability, and the government grants on the forgivable portion and the interest benefit won’t be realized until the Company meets the conditions for forgiveness.

NICKEL NORTH EXPLORATION CORP.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial instruments

i) Financial assets

All financial assets are initially recorded at fair value net of transaction costs, if applicable, and are classified as measured at amortized cost, fair value through other comprehensive income (“FVTOCI”) or fair value through profit or loss (“FVTPL”).

Financial assets that are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and the contractual terms of these financial assets give rise on specified date to cash flows that are solely payments of principal and interest on the principal amount outstanding, are subsequently measured at amortized cost using the effective interest rate method. The Company does not have any financial assets measured at amortized cost.

Upon initial recognition of equity securities, the Company may make an irrevocable election (on an instrument-byinstrument basis) to designate its equity securities that would otherwise be measured at FVTPL to present subsequent changes in fair value in other comprehensive income. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination. Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in other OCI. The cumulative gain or loss is not reclassified to profit or loss on disposal of the instrument; instead, it is transferred to retained earnings. The Company does not have any financial assets classified as FVTOCI.

By default, all other financial assets are measured subsequently at FVTPL. The Company’s cash and cash equivalents and restricted cash are measured at FVTPL.

ii) Financial Liabilities

All financial liabilities are initially recorded at fair value and classified as measured at amortized cost or FVTPL.

Financial are subsequently measured at amortized cost using the effective interest rate method except for financial liabilities at FVTPL, financial guarantee contracts, loan commitments as below-market interest rate, and liabilities related to contingent consideration of an acquirer in a business combination. The Company’s accounts and other payables, loan payable and CEBA loan are measured at amortized cost.

Financial liabilities classified as FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as FVTPL. Fair value changes on financial liabilities classified as FVTPL are recognized in the statement of comprehensive loss. The Company does not have any financial liabilities classified as FVTPL.

NICKEL NORTH EXPLORATION CORP.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial instruments (continued)

iii) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (“ECLs”) on:

• Financial assets measured at amortized cost; and

• Debt investments measured at FVOCI;

Credit-impaired financial assets

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

• Significant financial difficulty of the borrower or issuer;

• A breach of contract such as a default or being more than 90 days past due;

• The restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;

• It is probable that the borrower will enter bankruptcy or other financial reorganization; or

• The disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to the statement of comprehensive loss and is recognized in OCI.

Write-off of financial assets

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

NICKEL NORTH EXPLORATION CORP.

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial instruments (continued)

iv) Derecognition of financial assets and financial liabilities

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. The Company enters into transactions whereby it transfers assets recognized in its statement of financial position but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in the statement of comprehensive loss

• v) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Share capital

The Company records proceeds from the issuance of its common shares as equity. Incremental costs directly attributable to the issue of new common shares are shown in equity as a deduction, net of tax, from the proceeds. Common shares issued for consideration other than cash are valued based on their market value at the date that shares are issued.

Loss per share

Basic earnings/loss per share is calculated by dividing the earnings/loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. For all periods presented, the earnings/loss attributable to common shareholders equals the reported earnings/loss attributable to owners of the Company. The diluted earnings/loss per share reflects all dilutive potential common shares equivalents, which comprise outstanding stock options and share purchase warrants, in the weighted average number of common shares outstanding during the period, if dilutive.

Share-based payments

Share-based payments to employees and others providing similar services are measured at the grant date fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The amount recognized as an expense is adjusted to reflect the number of options expected to vest. The offset to the recorded cost is to contributed surplus. The number of options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount ultimately recognized as an expense is based on the number of options that eventually vest. Consideration received on the exercise of stock options is recorded as share capital and the related contributed surplus is transferred to share capital.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

NICKEL NORTH EXPLORATION CORP.

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Share-based payments (continued)

The fair value of the stock options is determined using the Black-Scholes option pricing model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility), weighted average expected life of the instruments (based on historical experience), expected dividends, expected forfeitures, and the risk-free interest rate (based on government bonds).

Income taxes

Current income taxes receivable or payable are estimated on taxable income or loss for the current year at the statutory tax rates enacted or substantively enacted at the reporting date.

Deferred income tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax assets and liabilities are measured at the tax rates that have been enacted or substantially enacted at the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets also result from unused loss carry forwards and other deductions. At the end of each reporting year the Company reassesses unrecognized deferred tax assets. Deferred income tax assets are recognized for unused tax losses, tax credits and deductible temporary differences, only to the extent that it is probable that future taxable profit will be available against which they can be utilized.

Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority.

Flow-through shares

Canadian tax legislation permits a company to issue flow-through shares whereby the deduction for tax purposes relating to qualified resource expenditures is claimed by the investors rather than the Company. On issue, share capital is recorded at the trading value of an ordinary common share. The difference between the proceeds and the ordinary common share value is recorded as a flow-through share premium liability. The flow-through share premium liability is reduced upon incurring qualifying expenditures and renouncement by the Company of the tax benefits associated with the related expenditures. To the extent that suitable deferred income tax assets are available, the Company will reduce any deferred income tax liability and record a deferred income tax recovery or expense.

Newly adopted and future accounting standards

New standards or amendments are either not applicable or not expected to have a significant impact on the Company’s financial statements.

4. CASH AND CASH EQUIVALENTS

==> picture [350 x 79] intentionally omitted <==

NICKEL NORTH EXPLORATION CORP.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

5. RESTRICTED CASH

The Company has provided corporate credit cards to its directors with a credit limit totalling $25,000 to pay the Company’s expenses. As collateral for the credit cards, the Company has a GIC of $28,750 earning annual interest at the prime rate minus 2.2% per annum. As at June 30, 2021, the credit cards had a payable balance of $66 (December 31, 2020 – $126) in total, which is included in accounts and other payables.

6. EQUIPMENT

==> picture [370 x 111] intentionally omitted <==

==> picture [370 x 112] intentionally omitted <==

==> picture [370 x 112] intentionally omitted <==

NICKEL NORTH EXPLORATION CORP.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

7. EXPLORATION AND EVALUATION ASSETS

==> picture [475 x 104] intentionally omitted <==

==> picture [475 x 104] intentionally omitted <==

==> picture [475 x 104] intentionally omitted <==

==> picture [475 x 103] intentionally omitted <==

==> picture [475 x 104] intentionally omitted <==

NICKEL NORTH EXPLORATION CORP.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

7. EXPLORATION AND EVALUATION ASSETS (Continued)

Hawk Ridge Property:

On March 29, 2012, the Company entered into an option agreement with Anthem Resources Inc. (“Anthem”) and its wholly-owned subsidiary (together the “Optionors”), which was subsequently amended on May 15, 2012 (the “First Amendment”), on February 15, 2013 (the “Second Amendment”), and on April 17, 2013 (the “Third Amendment”) whereby the Optionors granted the Company an option to acquire a 100% interest in the Hawk Ridge Ni-Cu-PGE Project in Northern Quebec (the “Hawk Ridge Property”) by making staged payments totaling $2,000,000 in cash, $907,919 equivalent in common shares of the Company and $92,081 by services in kind to Anthem by December 31, 2013 as follows:

• Pay $500,000 in cash (paid) and $250,000 in common shares (issued) within five business day of TSX-V final approval of the transaction;

• Pay $500,000 in cash (paid) and $250,000 in common shares (issued) by December 31, 2012; and

• Pay $1,000,000 in cash (reduced by $92,081 for 20% of geophysical survey costs paid by the Company) and issue $500,000 in common shares ($500,000 divided by the greater of (A) the price per consideration share (“Share”), equal to 10% discount to the Share’s moving average trading price for the 20 day period immediately preceding the date of issuance, and (B) $0.20) on or before December 31, 2013 (issued).

During the year ended December 31, 2013, under the Third Amendment, in lieu of paying $1,000,000 in cash on or before December 31, 2013, the Company issued to the Optionors 3,631,675 units (the “Conversion Units”) equal to $907,919 ($1,000,000 less $92,081 for the geophysical survey costs) divided by $0.25 per Conversion Unit. Each Conversion Unit consists of one common share and one half of one common share purchase warrant with each whole warrant entitling the holder to acquire one additional common share for a period of two years, at an exercise price of $0.35 per share in the first year and $0.60 per share in the second year. In addition, the Company issued 2,500,000 common shares equal to $500,000 divided by the greater of $0.20 or a 10% discount to the 20 day moving average trading price of the Company for the 20 day period immediately preceding the date of issuance.

On May 1, 2013, the Company has fulfilled all option payments and acquired 100% ownership of the Hawk Ridge Property.

The property is subject to a 3% net smelter returns royalty (“NSR”) and the Company has the option to purchase onethird of the NSR (1%) for $1,000,000.

During the period ended June 30, 2021, nil impairment loss is recorded on the Hawk Ridge Property (December 31, 2020 – $27,278).

The exploration expenditures incurred on the property in Quebec are entitled to certain Quebec mining exploration tax credits.

Nairn Property:

On August 23, 2013, pursuant to a property purchase agreement with Sino Minerals Corp. (“Sino Minerals”) entered into on June 27, 2013, the Company acquired all of Sino Mineral’s 100% interest in 14 mining claims covering a total area of approximately 2,860 hectares located in the Province of Ontario and known as the Nairn Property (the “Nairn Property”), subject to a 2% net smelter returns royalty over six of the claims and third party freehold patent surface rights over eight of the claims. In consideration for the Nairn Property, the Company issued to Sino Minerals 2,000,000 common shares at a market price of $0.12 per share for a fair value of $240,000.

The Company has no future planned exploration activity on the property and has recorded a write-down of $248,291 for the year ended December 31, 2017 for the difference between the estimated recoverable amount as at December 31, 2017 of $1 and the carrying value of the property.

NICKEL NORTH EXPLORATION CORP.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

8. ACCOUNTS AND OTHER PAYABLES

The Company’s accounts and other payables are as follows:

==> picture [401 x 140] intentionally omitted <==

Please also refer to Note 10 for breakdown of due to related party balances included in accounts and other payables.

9. SHARE CAPITAL

Authorized

The Company has authorized an unlimited number of common shares with no par value and an unlimited number of non-voting, non-participating, non-cumulative preferred shares without par value issuable in series.

Shares issued and outstanding

								Number of
								Common Shares	$
Balance, January	1,	2020, December	31,	2020	and June	30,	2021	76,518,747	11,101,459

During the six months period ended June 30, 2021, the Company had no common share transactions.

During the year ended December 31, 2020, the Company had no common share transactions.

As at June 30, 2021 and December 31, 2020, the Company does not have any preferred shares outstanding.

Stock options

The Company has a stock option plan under which it is authorized to grant options to executive officers and directors, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common shares of the Company. The exercise price of each option shall not be less than the market price of the Company's stock at the date of grant. The options can be granted for a maximum term of 5 years and vest as determined by the board of directors.

During six months ended June 30, 2021 and during the years ended December 31, 2020, no stock options were granted.

No outstanding and exercisable option at June 30, 2021 and December 31, 2020.

NICKEL NORTH EXPLORATION CORP.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

9. SHARE CAPITAL (continued)

Warrants

The Company uses the residual value approach when allocating the fair value of the share purchase warrants issued in conjunction with the offering of units through a private placement. The Company determines the fair value of the common share and the residual value is allocated to the share purchase warrant for unit offerings that contain a common share and a share purchase warrant. Agents’ warrants are measured at fair value on the date of the grant as determined using a Black-Scholes option pricing model.

During six months ended June 30, 2021 and during the year ended December 31, 2020, the Company did not issue any warrants or have any warrant transactions.

No outstanding and exercisable warrants at June 30, 2021 and December 31, 2020.

10. RELATED PARTY TRANSACTIONS AND BALANCES

The Company entered into the following related party transactions for the six months ended June 30, 2021 and 2020:

• a) Incurred consulting fees of $30,000 (June 30, 2020 - $30,000) from a company controlled by the Chief Executive Officer (“CEO”) of the Company.

• b) Incurred consulting fees of $9,000 (June 30, 2020 - $24,500) from the Chief Finance Officer (“CFO”) of the Company.

• c) Incurred corporate consulting fees of $15,000 (June 30, 2020 - $15,000) from the Company’s majority shareholder.

• d) On November 2, 2016 the Company entered into a loan agreement with its majority shareholder, Sinotech (Hong Kong) Corporation Limited. (“Sinotech”) for the principal amount of $300,000. The loan was unsecured, bore interest at 8% per annum and matured on December 31, 2016. On December 30, 2016 and June 28, 2017, the Company and Sinotech entered into loan amendment agreements and as of December 31, 2017, the total loan payable to Sinotech from the Company including accrued interest was $624,148.

On May 31, 2018, the Company and Sinotech entered into Amendment No.3 to the Loan Agreement (“Amendment No.3”) to further extend the repayment term of the loan to December 31, 2018, increase the principal amount of the loan to $844,005 and increase the interest rate on the loan from 8% per annum to 10% per annum. On December 27, 2018, the Company and Sinotech entered into Amendment No.4 to the Loan Agreement (“Amendment No.4”) to further extend the repayment term of the loan to March 31, 2019 and increase the principal amount of the loan to $892,248. On March 18, 2019, the Company and Sinotech entered into Amendment No.5 to the Loan Agreement (“Amendment No.5”) to further extend the repayment term of the loan payable to June 30, 2019 and increase the principal amount of the loan to $1,012,048. The Company subsequently received the $100,000 loan principal from Sinotech on April 26, 2019. On July 16, 2019, the Company and the Sinotech entered into Amendment No.6 to the Loan Agreement (“Amendment No. 5”) to further extend the repayment term of the loan to the Company to December 31, 2019, while also increasing the principal amount of the loan to $1,039,849. On January 13, 2020, the Company and the Sinotech entered into Amendment No.7 to the Loan Agreement (“Amendment No. 6”) to further extend the repayment term of the loan to the Company to December 31, 2020, while also increasing the principal amount of the loan to $1,092,269. On April 3, 2020, an additional $50,000 loan was received from Sinotech. On December 22, 2020, another loan agreement was entered and $100,000 was received by the Company in January 2021. The new principal amount comprises the current principal amount of the loan advanced to the Company to date and accrued interest thereon. The new principal amount will bear interest at a fixed rate of 10% per annum. All other terms and conditions of initial loan agreement between the Company and the Lender dated November 2, 2016 remain in force and are unamended except to the extent amended by the parties.

NICKEL NORTH EXPLORATION CORP.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

10. RELATED PARTY TRANSACTIONS AND BALANCES (continued)

During the six months ended June 30, 2021, the Company incurred interest expense of $68,142 (June 30, 2020 - $56,233) in relation to this loan payable. As at June 30, 2021, the total loan payable to Sinotech from the Company including accrued interest was $1,425,435 (December 31, 2020 - $1,257,293).

• e) Incurred director fees of $10,625 (June 30, 2020 - $10,626) from the directors of the Company which have been included in consulting fees in the statement of comprehensive loss.

• f) Included in account and other payables is $356,907 (June 30, 2020 - $335,209) due to directors, officers and companies controlled by directors and officers for services rendered and unpaid director fees. These amounts are unsecured, non-interest bearing, and have no specific terms of repayment.

11. CAPITAL MANAGEMENT

The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to pursue the exploration and evaluation of its mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. In the management of capital, the Company includes components of shareholders’ equity in the definition of capital.

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may attempt to issue new shares, issue new debt, and acquire or dispose of assets. The Board of Directors does not establish quantitative return on capital criteria for management.

There were no changes in the Company's approach to capital management from the prior year. The Company is not subject to externally imposed capital requirements.

12. FINANCIAL INSTRUMENTS

Fair values

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts and other payables, CEBA loan and loan payable. The fair value of these financial instruments approximates their carrying value due to their current nature or short terms of maturity.

The following table summarizes the carrying values of the Company’s financial instruments:

==> picture [461 x 95] intentionally omitted <==

• (i) Cash and cash equivalents, restricted cash

(ii) Accounts and other payables, CEBA loan and loan payable

NICKEL NORTH EXPLORATION CORP.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

12. FINANCIAL INSTRUMENTS (continued)

Fair values (continued)

The Company classifies its fair value measurements in accordance with the three level fair value hierarchy 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

The following table sets forth the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy as follows:

==> picture [456 x 65] intentionally omitted <==

Financial risk management

The Company’s financial risks arising from its financial instruments are credit risk, liquidity risk, and interest rate risk. The Company’s exposures to these risks and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

Credit risk is the risk of potential loss to the Company if the counter party to a financial instrument fails to meet its contractual obligations. The credit risk of the Company is associated with cash and cash equivalents. The credit risk with respect to its cash and cash equivalents is minimal as they are held with high-credit quality financial institutions. Management does not expect these counterparties to fail to meet their obligations.

Liquidity risk

Liquidity risk is the risk that the Company will not meet its obligations associated with its financial liabilities as they fall due. As at June 30, 2021, the Company had a working capital deficiency of $1,711,210 (December 31, 2020 – working capital deficiency of $1,559,057). All of the Company’s financial liabilities are classified as current except CEBA loan.

At present, the Company’s operations do not generate cash flow. The Company’s primary source of funding has been the issuance of equity securities through private placements, issuance of debt, and the exercise of stock options and warrants. Despite previous success in acquiring these financings, there is no guarantee of obtaining future financings.

Significant contractual obligations in years subsequent to June 30, 2021 are as follows:

==> picture [425 x 72] intentionally omitted <==

NICKEL NORTH EXPLORATION CORP.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

12. FINANCIAL INSTRUMENTS (continued)

Financial risk management (continued)

Interest rate risk

The Company is exposed to interest rate risk to the extent that the cash and cash equivalents and restricted cash maintained at the financial institutions. The interest rate risks on cash, cash equivalents and restricted cash are not considered significant due to their short-term nature.

14. GOVERNMENT LOAN

Canada Emergency Business Account (CEBA) is intended to support businesses by providing financing for their expenses that cannot be avoided or deferred as they take steps to safely navigate a period of shutdown, thereby helping to position businesses for successful relaunch when the economy reopens during COVID-19 outbreak. This program provides interest-free loans of up to $60,000 to small businesses and not-for-profits. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 33 percent.

The company has no plan regarding paying off the CEBA loan as of June 30, 2021.

15. SUBSEQUENT EVENTS

Debts settlement

On April 13, 2021, the Company entered into agreements to settle indebtedness of the Company in the aggregate amount of $304,420.50 by way of a shares for debt transaction at a price of $0.05 per common share of the Company for a total aggregate of 6,088,410 Shares. This debt settlement is pending approval of the TSX Venture Exchange. On August 5, 2021, the company made an amended filing to the TSX Venture Exchange seeking approval of the settlement of the Company in the aggregate amount of $164,375.00 by way of a shares for debt transaction at a price of $0.05 per common share of the Company for a total aggregate of 3,287,500 Shares.