Otso Gold Corp. — Interim / Quarterly Report 2022

Sep 29, 2021

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OTSO GOLD CORP.

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2021

Expressed in Canadian Dollars

(Unaudited)

Reader’s Note:

These unaudited condensed consolidated interim financial statements of Otso Gold Corp. have been prepared by management. The comparative information for the three and six-month periods ended July 31, 2020, have not been reviewed by the Company’s auditor.

OTSO GOLD CORP. Canadian Dollars (Unaudited)

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

CONDENSEDINTERIMCONSOLIDATEDSTATEMENTS OFFINANCIALP	OSITION
	As at As at July 31, 2021 January 31, 2021
ASSETS Current assets Cash and cash equivalents Accounts receivable Prepaid expenses Inventory_(Note 3) Non-current assets Property, plant and equipment(Note 4) Reclamation bonds(Note 5) Exploration and evaluation assets TOTAL ASSETS LIABILITIES Current liabilities Accounts payable and accrued liabilities Convertible debentures(Note 8) Loan(Note 6) Pandion Loan(Note 7) Royalty Provision(Note 7) Non-current liabilities Convertible debentures(Note 8) Royalty Provision(Note 7) Decommissioning and rehabilitation provision(Note 9) SHAREHOLDERS’ EQUITY (DEFICIENCY) Share capital(Note 10) Accumulated other comprehensive income Contributed surplus(Note 10) Deficit TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY) Nature of Operations and Going Concern(Note 1) Commitment and Contingencies(Note 13)_	$ $ 12,503,088 95,531 125,010 499,797 184,671 77,220 2,225,305 2,332,606
	15,038,074 3,005,154 55,853,164 52,651,492 5,765,276 5,094,528 1 1
	61,618,441 57,746,021
	76,656,515 60,751,175
	9,818,280 15,308,184 - 419,378 - 1,278,000 29,024,726 25,595,108 3,715,869 1,468,053
	42,558,875 44,068,723 5,093,620 4,079,092 10,847,247 10,647,465 11,395,564 11,966,577
	69,895,306 70,761,857 51,461,482 21,794,634 (1,161,944) 629,982 3,202,481 3,202,481 (46,740,810) (35,637,779)
	6,761,209 (10,010,682)
	76,656,515 60,751,175

These unaudited condensed consolidated interim financial statements were approved by the Board of Directors on September 29, 2021 and were signed on its behalf by:

“Brian Wesson” Brian Wesson,Director	“Yvette Harrison”
	Yvette Harrison,Director

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

OTSO GOLD CORP. Canadian Dollars (Unaudited)

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

CONDENSEDINTERIMCONSOLIDATEDSTAT	EMENTS OFLOSS ANDCOMPREHENSIVELOSS
	Three months ended July 31, Six months ended July 31, 2021 2020 2021 2020
Expenses Care and maintenance costs_(Note 11) Management and consulting(Note 12) Professional fees Share based payments Marketing and administration Other (income) expenses Interest expense Debt restructuring(Note 7 & 8) Revaluation of Royalty Provision(Note 7) Accretion of Pandion Loan(Note 7) Accretion expense(Notes 8 & 9) Foreign exchange Revaluation of embedded derivatives(Note 8)_ Interest income Net loss for the period Other comprehensive income to be reclassified to profit and loss in subsequent periods Currency translation adjustment Comprehensive loss for the period Loss per common share – basic and diluted Weighted average number of shares outstanding – basic and diluted	$ $ $ $ - 962,242 81,332 2,608,397 93,371 422,417 282,983 836,172 459,967 118,965 757,640 345,034 - 123,463 - 123,463 31,006 198,463 481,151 377,426
	584,344 1,825,550 1,603,106 4,290,492 294,459 1,564 294,459 12,174 647,036 - 1,722,306 - 1,857,590 1,820,332 2,447,598 1,320,305 1,885,621 1,914,040 3,823,575 3,647,393 280,776 240,913 537,465 329,110 763,617 (869,960) (13,355) 176,195 953,506 (426,582) 688,006 143,297 - 68 (129) (67)
	6,682,605 2,680,375 9,499,925 5,628,407
	7,266,949 4,505,925 11,103,031 9,918,899 13,202 (1,591,442) 1,791,926 (3,457,610)
	7,280,151 2,914,483 12,894,957 6,461,289
	0.01 0.02 0.02 0.04 649,947,750 225,915,023 619,282,568 224,123,784

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

OTSO GOLD CORP. Canadian Dollars (Unaudited)

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY/ (DEFICIENCY)

CONDENSEDINTER	IMCONSOLIDATEDSTATEMENTS OFCHANGES INEQUITY/ (DEFICIENCY)
	Common Shares Share Capital Contributed Surplus AOCI Deficit Total Shareholders’ Equity / (Deficiency)
Balance at February 1, 2020 Private placement Share issuance costs Stock options exercised Share-based payments Warrants issued on extension of convertible debentures Currency translation adjustment Loss for the period Balance at July 31, 2020 Balance at February 1, 2021 Private placement, net of share issuance costs_(Note 10) Shares issued pursuant to Pandion Loan(Notes 7, 10) Shares issued to Lionsbridge as financing costs(Note 10)_ Shares issued for warrants exercised Currency translation adjustment Loss for the period Balance at July 31, 2021	# $ $ $ $ $ 222,292,740 20,007,626 2,783,315 (1,535,032) (20,260,356) 995,553 10,400,001 322,358 247,642 - - 570,000 (29,750) 4,892 - - (24,858) 750,000 76,684 (39,184) - - 37,500 74,555 - - 74,555 48,908 - - 48,908 - - - 3,457,610 - 3,457,610 - - - - (9,918,899) (9,918,899)
	233,442,741 20,376,918 3,120,128 1,922,578 (30,179,255) (4,759,631)
	269,741,758 21,794,634 3,202,481 629,982 (35,637,779) (10,010,682) 284,944,440 8,034,536 5,993,764 - - 14,028,300 31,909,280 1,595,464 - - - 1,595,464 32,380,050 - - - - - 284,944,440 20,036,848 (5,993,764) 14,043,084 - - - (1,791,926) - (1,791,926) - - - - (11,103,031) (11,103,031)
	903,919,968 51,461,482 3,202,481 (1,161,944) (46,740,810) 6,761,209

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

OTSO GOLD CORP. Canadian Dollars (Unaudited)

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

CONDENSEDINTERIMCONSOLIDATEDSTATEMENTS OFCAS	HFLOWS
	Six months ended Six months ended July 31, 2021 July31,2020
Operating Activities Loss for the period Items not affecting cash: Accretion expense Depreciation of property and equipment Revaluation of royalty provision Accretion of loan Unrealized foreign exchange Revaluation of embedded derivatives Share based compensation Debt restructuring Interest expense Change in non-cash working capital items: Accounts receivable Prepaid expenses Inventory Accounts payable and accrued liabilities Cash provided by (used in) operating activities Investing Activities Property and equipment Reclamation bond Cash provided by (used in) investing activities Financing Activities Proceeds from private placement, net of share issuance costs Options exercised Warrants exercised Issuance of convertible debentures Convertible debentures principal repayment Repayment of loan Interest paid on debt Cash provided by (used in) financing activities Effects of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash at the beginning of the period Cash at the end of the period Supplemental Cash Flow Information Shares issued to Lionsbridge as financing costs_(Note 10) Shares issued for Pandion payment (_Note 7) Re-allocation of fair value of warrants exercised	$ $ (11,103,031) (9,918,899) 537,465 329,110 37,504 208,241 2,447,598 1,320,305 3,823,575 3,647,393 (236,399) 157,684 688,006 143,297 - 123,463 1,722,306 - 236,428 9,428
	(1,846,548) (3,979,978)
	357,351 419,606 (109,772) (128,371) - 178,622 (3,853,550) 934,732
	(3,605,971) 1,404,589
	(5,452,519) (2,575,389)
	(6,936,801) - (910,105) -
	(7,846,906) -
	14,028,300 545,142 - 37,500 14,043,084 - - 2,272,750 (419,378) - (1,275,677) - (254,730) -
	26,121,599 2,855,392
	(414,617) (6,183)
	12,407,557 273,820 95,531 239,064
	12,503,088 512,884
	1,619,002 - 1,595,464 - 5,993,764 -

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

OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1 Nature of operations and going concern

Otso Gold Corp. (“Otso” or the "Company") is engaged in the development of the Otso Gold Mine in Finland. The Company’s common shares trade on the TSX Venture Exchange (“TSXV”) under the symbol “OTSO” and the Company is incorporated and domiciled in Canada.

The Company announced on March 8, 2019 that the Otso Gold Mine was to be placed on care and maintenance from pre-commercial production due to operational issues and a lack of sufficient funds to continue production. The effective date of care and maintenance was April 1, 2019. On February 8, 2021, upon completion of the financing with Brunswick Gold Ltd. (“Brunswick”) (Note 10), the Company recommenced its development activities to get the Otso Gold Mine ready again for pre-commercial production. The mining development expenses during the period from April 1, 2019 to February 8, 2021 were expensed as care and maintenance costs and from February 8, 2021 onwards, have been capitalized as development costs of the Company’s Otso Gold Mine within property, plant and equipment (Note 4).

These unaudited condensed interim consolidated financial statements (“Financial Statements”) are prepared on a going concern basis, which assumes that the Company will be able to meet its obligations and continue its operations for at least the next twelve months. The Company has incurred operating losses since inception and currently is incurring negative cash flows from operating activities. In order to continue as a going concern, the Company must generate sufficient operating cash flows, secure additional capital or otherwise pursue a strategic restructuring, refinancing or other transactions to provide it with additional liquidity.

Several adverse conditions and material uncertainties cast significant doubt upon the going concern assumption. During the six months ended July 31, 2021, the Company incurred net cash outflows from operating activities of $5,452,519 (2020: $2,575,389) and investing activities of $7,846,906 (2020: $nil). As at July 31, 2021, the Company had a working capital deficiency of $27,520,801 (January 31, 2021: $41,063,569). There can be no assurances that sufficient funding, including adequate financing, will be available to maintain the Otso Gold Mine and to cover general and administrative expenses necessary for the maintenance of a public company for at least twelve months.

During the year ended January 31, 2021, the Company raised $3,439,250 and $807,500 through the issuance of debt and equity respectively.

During the six months ended July 31, 2021, Otso completed a financing with Brunswick Gold Ltd. for a strategic investment of US$11 million in the Company and an additional $11 million obtained from the exercise of related warrants (Note 10).

To date the Company has been able to raise the requisite financings but there can be no guarantee that the Company will be able to continue to secure additional financing in order to be able to continue operations for the foreseeable future, and if so, on terms that are favorable.

Realization values may be substantially different from carrying values as shown in these Financial Statements. These Financial Statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. Such adjustments could be material.

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Since March 2020, the Company, like the rest of the world, was affected by the COVID-19 pandemic.

The primary effect on the Company was the delay in the refinancing of the Otso Gold Mine’s return to preproduction, which increased the care and maintenance costs of the Otso Gold Mine. Additionally, the inability of senior staff to travel to site freely delayed the Company’s progress including installing new systems and controls on site and planning for the return to production.

The Company has implemented the recommendations of the Finnish government in relation to COVID-19 including the wearing of masks, installation of hygiene stations and a system of mandatory testing and quarantine for those who travel to site from outside of Finland.

Shortly after completion of the financing with Brunswick, all senior staff spent significant time on site to ensure any further delays were minimised.

2 Basis of preparation

Statement of compliance

These Financial Statements, including comparatives, have been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting, and based on the principles of International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These Financial Statements should be read in conjunction with the Company’s annual audited consolidated financial statements for the year ended January 31, 2021, which include all the Company’s significant accounting policies, and these Financial Statements have been prepared following the same accounting policies.

These Financial Statements were authorized for issue by the Board of Directors of the Company on September 29, 2021.

Basis of measurement

These Financial Statements have been prepared on a historical cost basis except for the derivative liabilities. In addition, these Financial Statements have been prepared using the accrual basis of accounting except for cash flow information. The Financial Statements are presented in Canadian dollars, unless otherwise stated.

Significant accounting estimates and judgements

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amount and classification of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in which the estimates are revised and in any future periods affected.

In preparing these Financial Statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty, except for the timing of the

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

recommencement of the development activities from care and maintenance activities (Note 1), were the same as those applied to the annual audited consolidated financial statements for the year ended January 31, 2021.

3 Inventory

Inventory consists of parts and supplies, including priority spares and maintenance consumables for the mine site. As at July 31, 2021, inventory is $2,225,305 (January 31, 2021 - $2,332,606).

4 Property, plant and equipment

Cost or Deemed Cost Balance at January 31, 2020 New ARO estimate Depreciation Currency translation adjustment Balance at January 31, 2021 Additions Depreciation Depreciation capitalized Currency translation adjustment Balance at July 31, 2021	$ $ $ $ $ $ 2,594,840 2,243,942 6,360,362 41,215,344 - 52,414,488 - - - (141,253) - (141,253) - - (1,202,946) (183,680) - (1,386,626) 89,996 77,826 178,873 1,418,188 - 1,764,883
	2,684,836 2,321,768 5,336,289 42,308,599 - 52,651,492
	2,095 5,697,236 3,223 5,702,554 - - (583,121) (354,958) (54) (938,133) - - - 900,629 - 900,629 (115,267) (99,679) (179,120) (2,069,312) - (2,463,378)
	2,569,569 2,222,089 4,576,143 46,482,194 3,169 55,853,164

5 Reclamation bonds

The reclamation bonds represent cash of $5,727,776 (January 31, 2021 - $5,057,028) that has been placed in trust as security to the appropriate government entity relating to the Company’s site closure obligations in Finland. The total reclamation deposits are for government reclamation bonds for the Otso Gold Mine project and a deposit held for the Finnish Safety and Chemical Agency. These security deposits are posted with a Finnish financial institution.

A security deposit of $37,500 (January 31, 2021 - $37,500) was made in favour of the BC Ministry of Energy and Mines prior to commencement of surface work on the Sheslay Project. A security deposit for this amount was posted with a Canadian financial institution.

6 Loan

During October 2020, the Company entered into a loan agreement with Amalgam Rail Management Ltd. (“Amalgam”) for a principal amount of USD$1,000,000 bearing interest at 7% per annum and repayable, together with accrued interest, on April 20, 2021. On February 8, 2021, the Company repaid the loan which included accrued interest of $26,769.

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

7 Pandion Loan

The Company is party to a loan agreement (“Pandion Loan”) with Pandion Mine Finance through their subsidiary PFL Raahe Holdings LP (“Pandion”), the key commercial terms of which are as follows:

• Payments of:

• USD$1.56 million payable in common shares of the Company upon reaching certain financing milestones;

  • Pursuant to this, during the year ended January 31, 2021, the Company issued 8,496,320 common shares to Pandion and settled US$328,174 ($424,816) of this amount. The remaining obligation of USD$1,231,826 ($1,595,464) was settled during the period ended July 31, 2021 through the issuance of 31,909,280 common shares (Note 10) and recognized as cost for debt restructuring.

• USD$11.5 million due in March 2021 (see below); and

• USD$11.5 million due in September 2021 (see below).

On December 13, 2020, the Company renegotiated the Pandion Loan for the entire outstanding balance of USD$23 million to be paid on or prior to December 7, 2021. This amendment was conditional on the completion of the financing from Brunswick Gold Ltd. The terms of the extension require the Company accrue interest from the effective date of the amendment of February 8, 2021 (Note 10) through to December 7, 2021 at a rate of 15% per annum. This amendment was treated as a modification of the Pandion Loan, resulting in debt restructuring cost of $227,280.

Pandion is also entitled to a 2.5% net smelter return (“Royalty Provision”) on gold production from the Otso Gold Mine.

The Royalty Provision is considered to be a derivative to be recognized on the statement on financial position at fair value. The Pandion Loan of USD$23 million is a financial liability carried at amortized cost.

The continuity of the Pandion Loan and the Royalty Provision was as follows:

Pandion Loan	$
Balance, January 31, 2020 Accretion Foreign translation adjustment Balance, January 31, 2021 Debt restructuring Settlement of financing milestone obligation (Note 10) Accretion Foreign translation adjustment Balance, July 31, 2021 Less, current portion Non-current portion	18,759,159 7,830,914 (994,965)
	25,595,108 1,822,744 (1,595,464) 3,823,575 (621,237)
	29,024,726 (29,024,726)
	-

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Royalty provision	$
Balance, January 31, 2020 Change in fair value Balance, January 31, 2021 Change in fair value Balance, July 31, 2021 Less, current portion Non-current portion	13,179,801 (1,064,283)
	12,115,518 2,447,598
	14,563,116 (3,715,869)
	10,847,247

As at July 31, 2021, significant inputs used in the valuation of the royalty provision were as follows:

Average monthly ounces of gold	7,751
Total months of gold production	112
Average gold price in USD	$1,832
Average exchange rate USD/CAD	1.26
Discount factor	94%

8 Convertible debentures

During the year ended January 31, 2018, the Company issued in total $419,000 of convertible debentures. The debentures were unsecured, bear interest at 9% per annum, were due on June 30, 2020 and convertible into common shares of the Company at $0.10 per share. The conversion feature of the convertible debenture was accounted for as an embedded derivative. The principal amount was repaid during the period ended July 31, 2021, resulting in a total gain on debt restructuring of $100,438, representing the interest previously accrued on these debentures.

During March 2020, the Company closed a non-brokered private placement of convertible debentures with face value of $4,671,250, discounted 20%, for total proceeds of $3,665,450. Of these convertible debentures, $1,532,700 (EUR 1 million) were issued as payment towards an existing payable to Tallqvist Infa OY (“Tallqvist”) (Note 13). Debentures totalling face value of $2,715,375 were issued to Pandion for proceeds of $2,100,750. Pandion is considered to be a related party to the Company due to its holdings of the Company’s common shares (Note 10).

These unsecured debentures bear interest at 10% per annum and are convertible into common shares of the Company at a price equal to the greater of $0.10 per share and the conversion date closing market price less a 20% discount. These debentures are due on March 26, 2023. The Company has an option of paying any interest due in common shares of the Company, with the number of such common shares being dependent on their market value on the date prior to the interest payment. Otso also has a right to redeem the debentures at their face value plus any accrued but unpaid interest prior to the maturity date.

During the year ended January 31, 2021, a total of 4,671,250 common shares, with fair value of $186,850, were issued to related parties as finders fees for these convertible debentures.

During the period ended July 31, 2021, the Company paid interest of $231,646 on its convertible debentures.

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

As at July 31, 2021, the total value of convertible debentures recognized was $5,093,620, comprised of the value of the conversion option derivative of $1,822,646 and the debentures of $3,270,974. A continuity of the debentures and the conversion option derivative was as follows:

	Debentures Conversion Option Derivative Total
Balance, beginning of the period Accretion Interest Repayment Adjustment to fair value Balance, end of the period	$ $ $ 3,363,830 1,134,640 4,498,470 558,168 - 558,168 (231,646) - (231,646) (419,378) - (419,378) - 688,006 688,006
	3,270,974 1,822,646 5,093,620

The fair value of the conversion option derivatives was determined using the Black-Scholes option pricing model with the following assumptions:

Risk free interest rate	0.38%
Expected dividend yield	0.00%
Conversion price	$0.10
Expected stock price volatility (calculated monthly)	95%
Expected option life	Based on remainingterm

9 Decommissioning and rehabilitation provision

	July 31, 2021
Balance, beginning of period New estimate Foreign exchange Accretion expense Balance, end of period	$ 11,966,577 - (550,310) (20,703)
	11,395,564

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

10 Share capital

a) Authorized

The Company is authorized to issue an unlimited number of common shares without par value.

b) Issued or allotted and fully paid

As at July 31, 2021, the Company had 903,918,968 (January 31, 2021 – 269,741,758) common shares outstanding.

Six months ended July 31, 2021

On February 8, 2021, the Company completed a financing with Brunswick Gold Ltd. (“Brunswick”) for a strategic investment of US$11 million in the Company. Pursuant to this financing, Brunswick Gold was issued 284,944,440 units of the Company at a price of $0.05 per unit. Each unit consists of one common share in the capital of the Company and one share purchase warrant. Of the total proceeds of US$11 million, US$4.7 million was allocated to the share purchase warrants and US$6.3 million was allocated to the common shares.

Upon closing of the financing with Brunswick, Lionsbridge Pty Ltd (“Lionsbridge”) and Pandion were issued 32,380,050 and 31,909,280 common shares of the Company valued at $1,619,002 and $1,595,464, respectively.

The common shares issued to Lionsbridge, (a company controlled by two directors of the Company) were pursuant to an earlier agreement through which Lionsbridge was entitled to receive a fee equal to 12.5% (payable in common shares) of any debt and equity financing completed by the Company. This agreement was terminated upon closing of the financing with Brunswick. The issuance of common shares to Pandion fully settled the US$1.56 million payment pursuant to the Pandion Loan (Note 7).

On July 20, 2021, Brunswick Gold Ltd exercised 284,944,440 common share purchase warrants that had been issued on a private placement basis on February 8, 2021. The company received $14,043,084 (US$11.155 million) from the warrant exercise.

After completion of this financing, on a non-diluted basis, Brunswick owns 63.05% of the outstanding common shares of the Company whereas Lionsbridge and Pandion own 9.16% and 8.76%, respectively. All three parties are considered related parties to the Company.

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

c) Stock options

Under the Company's stock option plan, the Company may grant stock options to its directors, officers, consultants, and employees. Options granted under this plan may expire up to ten years from the date of grant.

There was no stock option activity during the six month period ended July 31, 2021 (2020 – 1,550,000 options granted).

Details of stock options outstanding as at July 31, 2021 are as follows:

Date ofgrant Expiry date Exercise price	Outstanding and exercisable
$ June 27, 2018 June 27, 2023 0.15 July 6, 2018 July 6, 2023 0.14 September 20, 2019 September 19, 2024 0.05 June 11, 2020 June 11, 2025 0.08	# 300,000 250,000 2,100,000 1,550,000
	4,200,000

d) Warrants

As at July 31, 2021, the Company had 14,483,334 (January 31, 2021 – 16,706,411) warrants outstanding with a weighted average exercise price of $0.08 (January 31, 2021 – $0.08) and a weighted average remaining life of 3.97 years (January 31, 2021 – 3.94 years).

Warrant Activity is summarized below:

Warrant activity	July 31, 2021 Weighted average exerciseprice January 31, 2021 Weighted average exerciseprice
Balance – beginning of period Issued Exercised_(Note 10b)_ Forfeited Balance – end of period	# $ # $ 16,706,411 0.08 9,650,000 0.14 284,944,440 0.05 16,706,411 0.08 (284,944,440) 0.05 - - (2,223,077) (0.09) (9,650,000) 0.13
	14,483,334 0.08 16,706,411 0.08

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Details of warrants outstanding as at July 31, 2021 are as follows:

Date ofgrant Expiry date Exercise price	Outstanding and exercisable
$ June 2, 2020 June 2, 2025 0.096 June 5, 2020 June 5, 2025 0.096 July 17, 2020 July 27, 2025 0.06 September 24, 2020 September 24, 2025 0.07	# 3,333,334 1,750,000 5,400,000 4,000,000
	14,483,334

The fair value of the warrants was estimated using the Black-Scholes Model with the following weightedaverage assumptions:

	July 31,	January 31,
	2021	2021
Risk free interest rate	0.50%	0.36%
Expected dividend yield	0.00%	0.00%
Stock price	$0.05	$0.07
Expected stock price volatility (calculated monthly)	102%	106%
Expected warrant life in years	5 years	5 years
Forfeiture rate	0.00%	0.00%
Fair value on date ofgrant	$0.04	$0.05

11 Care & maintenance costs

Care and maintenance costs are broken down as follows:

	Six months ended July 31, 2021 Six months ended July 31, 2020
Depreciation of property and equipment Equipment rentals Salaries and wages Utilities Office and general Legal and professional fees Mining services including demobilization Travel Vehicle costs Telephone costs	$ $ 37,450 208,241 25,370 75,400 18,512 1,190,244 - 73,103 - 296,021 - 59,090 - 693,733 - 684 - 4,706 - 7,175
	81,332 2,608,397

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

	Three months ended July 31, 2021 Three months ended July 31, 2020
Depreciation of property and equipment Equipment rentals Salaries and wages Utilities Office and general Legal and professional fees Mining services including demobilization Travel Vehicle costs Telephone costs	$ $ - 115,379 - 21,367 - 286,305 - 34,307 - 99,564 - 35,980 - 360,849 - 84 - 2,060 - 6,347
	- 962,242

12 Related party transactions

Related party transactions not described elsewhere in these Financial Statements are summarized below.

The related parties consist of the Key management personnel and these are persons having authority and responsibility for planning, directing and controlling the activities of the Company. The Company has determined that key management personnel consists of members of the Company’s Board of Directors and the Company’s Chief Executive Officer and Chief Financial Officer.

The transactions with related parties include, Consulting fees, director fees, management fees, and other employment benefits, pursuant to service agreements with key management personnel for the three and six months ended July 31, 2021 were $380,795 and $770,453, respectively (2020 – $422,417 and $836,172, respectively), of this amount, $487,470 was capitalized to Mineral properties and machinery equipment and the balance of $282,983 was included in operating expenses.

Share based payments for the six months ended July 31, 2021 were $Nil (2020 - $67,706).

As at July 31, 2021, an amount of $654,523 (January 31, 2021 - $1,067,090) was included in accounts payable and accrued liabilities, representing amounts owing to directors and officers of the Company. Any amounts owing at any time to key management personnel are unsecured, non-interest bearing, and due on demand.

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

13 Commitments and contingencies

• a) Tallqvist, the company hired by Otso Gold Oy to mine the ore at the Otso Gold Mine had, on April 17, 2019, submitted a bankruptcy application with the District Court of Oulu. Otso Gold Oy rejected the bankruptcy application as being without merit as the bankruptcy requirements as set out in Finnish law had not been fulfilled. The bankruptcy application related to a civil claim filed by Tallqvist on April 23, 2019 with the District Court of Oulu. The amount of the claim was EUR 6,900,898 with penalty interest at 8% and legal costs (“Tallqvist Debt”). During July 2019, Tallqvist and the Company entered into a settlement agreement which included a payment schedule for EUR 6,900,898 plus interest on the Tallqvist Debt through to September 2020. As at July 31, 2021, the Company has paid EUR 1,876,213 and settled EUR 1,000,000 by issuance of a convertible debenture to Tallqvist as additional payment towards the settlement amount of the Tallqvist Debt (Note 8).

During December 2020, the Company and Tallqvist entered into a second amendment agreement whereby, upon closing of the financing with Brunswick Gold Ltd. (Note 10), Otso agreed to make various payments to Tallqvist as follows:

• All outstanding interest on the convertible debentures totalling EUR 95,078 (paid on February 8, 2021);

• A lump sum payment of the accrued interest on the Tallqvist Debt of EUR 275,000 (paid on February 18, 2021);

• Interest payment of 3%, out of the total interest of 8% on the Tallqvist Debt, to be made on a monthly basis starting February 2021 with the remaining 5% to be paid together with the Tallqvist Debt (total interest expense recognized during the six months ended July 31, 2021 was $294,459); and

• The Tallqvist Debt to be paid in its entirety on December 7, 2021.

• b) Former employees of Otso Gold Oy have filed lawsuits claiming unlawful dismissal. The claims are demanding EUR 513,513 as compensation along with penalty interest and legal costs. The claim is currently pending before the District Court of Oulu and there is a risk that the court may accept at least part of the claim, however, Otso Gold Oy rejects the claims as being without merit.

14 Financial instruments

Financial instruments recorded at fair value on the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.

The fair value of hierarchy has the following levels:

• Level 1 – quoted prices in active markets for identical financial instruments.

• Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in the markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

• Level 3 – valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

(a) Fair values of financial assets and liabilities

The Company’s financial instruments include cash, reclamation bond, accounts payable and accrued liabilities, convertible debentures, royalty provision, and the loans from external parties. The fair value of accounts

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

payable and accrued liabilities approximates their carrying value however, may be less than the carrying value due to the liquidity risk described above. The fair values of the derivative component of the convertible debentures (Note 8) and royalty provision (Note 7) are determined using inputs at level 3 of the fair value hierarchy.

(b) Credit risk

Credit risk arises from the potential that a counterparty will fail to perform its obligations. Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and reclamation bonds. Cash and cash equivalents consist of cash held at a Canadian bank. A substantial portion of the Company’s amounts receivable is Input Tax Credit. The carrying amount of cash and cash equivalents, reclamation bonds and amounts receivable represents the maximum credit exposure.

Management monitors the exposure to credit risk on an ongoing basis and does not consider such risk significant at this time.

(c) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its obligations when due, under both normal and stressed conditions, without incurring unacceptable losses. As at July 31, 2021, the Company had a cash balance of $12,503,088 (January 31, 2021 - $95,531) to settle current liabilities of $42,558,875 (January 31, 2021 - $44,068,723).

(d) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and interest rates will affect the Company’s operations, net earnings, or the value of financial instruments.

(e) Foreign currency risk

Foreign exchange risk is the risk that variations in exchange rates between foreign currencies will affect the Company's operating and financial results. The Company is exposed to foreign currency risk as it engages in transaction and holds assets and liabilities in currencies other than the Canadian dollar. Such currencies include the Australian dollar, US dollar, Euro, Swedish Krona, and the Mexican Peso. Otso does not hedge its exposure for foreign currencies.

(f) Interest rate risk

Interest rate risk is the risk that interest rate fluctuations will affect the Company's operating and financial results. Management does not believe that the Company is exposed to significant interest rate risk as its debt incurs interest at a fixed rate.

(g) Commodity price risk

The nature of the Company’s operations results in exposure to fluctuations in commodity prices. Commodity prices are impacted by global economic events that dictate the levels of supply and demand. Otso’s

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OTSO GOLD CORP. JULY 31, 2021 Canadian Dollars (Unaudited)

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

management continuously monitors commodity prices and may consider instruments to manage exposure to these risks when it deems appropriate.

The Company is exposed to commodity price risk with respect to the price of gold, which impacts the fair value of the royalty provision recognized by the Company. Commodity price risk is defined as the potential impact on earnings and economic value due to price movements. The Company closely monitors prices of gold to determine the appropriate course of action to be taken by the Company. Price risk could adversely affect the Company. In particular, the Company’s future profitability and viability of development depends upon the market price of gold.

15 Segment disclosure

The Company has one reportable segment, being the acquisition and exploration of gold resource properties. The following table provides segmented disclosure of assets and liabilities based on geographic location:

	Americas	**Europe **	Total
July 31, 2021	$	$	$
Current assets	10,941,588	4,096,486	15,038,074
Non-current assets
Other non-current assets	37,500	5,727,776	5,765,276
Property and equipment	3,169	55,849,995	55,853,164
Exploration and evaluation assets	1	-	1
Liabilities
Current Liabilities	(34,366,171)	(8,192,704)	(42,558,875)
January 31, 2021
Current assets	139,734	2,865,420	3,005,154
Non-current assets
Other non-current assets	37,500	5,057,028	5,094,528
Property and equipment	-	52,651,492	52,651,492
Exploration and evaluation assets	1	-	1
Liabilities
Current Liabilities	(31,700,805)	(12,367,918)	(44,068,723)

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