TDG Gold Corp — Audit Report / Information 2021

Nov 30, 2021

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TDG GOLD CORP. (Formerly Kismet Resources Corp.)

CONSOLIDATED FINANCIAL STATEMENTS

For the year ended July 31, 2021

(Expressed in Canadian dollars)

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of

TDG Gold Corp. (formerly Kismet Resources Corp.)

Opinion

We have audited the accompanying consolidated financial statements of TDG Gold Corp. (formerly Kismet Resources Corp.) (the “Company”), which comprise the consolidated statements of financial position as at July 31, 2021 and 2020, and the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at July 31, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

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

Material Uncertainty Related to Going Concern

We draw attention to Note 1 of the consolidated financial statements, which indicates that management estimates that its working capital as at July 31, 2021 may not provide the Company with sufficient financial resources to carry out currently planned exploration and operations throughout the next twelve months. As stated in Note 1, these events and conditions indicate that material uncertainties exist that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information obtained at the date of this auditor's report includes Management’s Discussion and Analysis.

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

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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

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

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

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

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

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

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

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

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

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

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

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

The engagement partner on the audit resulting in this independent auditor’s report is Guy Thomas.

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Vancouver, Canada November 29, 2021

Chartered Professional Accountants

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian dollars)

			July 31,		July 31,
	Note		2021		2020
ASSETS
Current
Cash	5	$	4,810,269	$	1,822,505
Receivables	6		125,362		19,121
Prepaid expenses	7		273,099		63,783
			5,208,730		1,905,409
Equipment	8		238,521		-
Exploration and evaluation assets	9		6,874,572		15,000
		$	12,321,823	$	1,920,409
LIABILITIES
Current
Trade and other payables	11	$	1,179,798	$	152,475
Flow-throughpremium liability	13		259,159		-
			1,438,957		152,475
Asset retirement obligation	12		974,287		-
			2,413,244		152,475
EQUITY
Share capital	13		27,315,938		15,592,011
Obligation to issue shares	20		425,000		-
Reserve	13		823,534		-
Deficit			(18,655,893)		(13,824,077)
			9,908,579		1,767,934
		$	12,321,823	$	1,920,409
Nature of operations and going concern	1
Reverse take-over	4
Proposed transaction	19
Subsequent event	20

These consolidated financial statements are approved for issue by the Board of Directors of the Company on November 29, 2021.

On behalf of the Board:

/s/ Fletcher Morgan Director /s/ Andrew French Director

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

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(Expressed in Canadian dollars)

			Year ended July 31,	Year ended July 31,	Year ended July 31,
	Note		2021		2020
Expenses
Accretion	12	$	2,146	$	-
Consulting fees	14		373,825		74,000
Depreciation	8		12,554		-
Exploration and evaluation expenditures	9		2,749,359		149,155
Foreign exchange			-		1,317
Investor relations			67,554		-
Office expenses			50,807		10,511
Professional fees			229,842		86,997
Project investigation costs	19		298,501		63,188
Share-based compensation	13 & 14		767,657		-
Transfer agent and filing fees			30,229		-
Travel			13,595		-
			(4,596,069)		(385,168)
Flow-through premium recovery	13		605,579		7,500
Gain on disposition of subsidiaries	10		-		34,719
Interest income			8,235		-
Listing expense	4		(849,561)		-
Loss and comprehensive loss for the year		$	(4,831,816)	$	(342,949)
Basic and diluted loss per share		$	(0.10)	$	(0.03)
Weighted average number of shares outstanding			48,178,286		9,991,000

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

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian dollars)

		Year ended July 31,	Year ended July 31,	Year ended July 31,
		2021		2020
Cash flows to operating activities
Loss for the year	$	(4,831,816)	$	(342,949)
Items not affecting cash:
Accretion		2,146		-
Depreciation		12,554		-
Share-based compensation		767,657		-
Flow-through premium recovery		(605,579)		(7,500)
Gain on disposition of subsidiaries		-		(34,719)
Listing expense		849,561		-
Change in non-cash working capital items:
Receivables		(100,892)		(3,098)
Prepaid expenses		(209,316)		(52,795)
Trade and otherpayables		1,022,573		89,560
		(3,093,112)		(351,501)
Cash flows to investing activities
Purchase of equipment		(251,075)		-
Exploration and evaluation assets		(15,000)		(15,000)
Cash incurred on reverse take-over, net of cash acquired		(215,965)		-
Disposition of subsidiaries,net of cash sold		-		(29,589)
		(482,040)		(44,589)
Cash flows from financing activities
Proceeds from private placements		6,122,532		2,146,380
Share issue costs		(11,282)		(9,619)
Obligation to issue shares		425,000		-
Exercise of options		26,666		-
		6,562,916		2,136,761
Increase in cash for the year		2,987,764		1,740,671
Cash, beginning ofyear		1,822,505		81,834
Cash, end of year	$	4,810,269	$	1,822,505
Non-cash investing and financing activities Shares issued for exploration and evaluation assets Finders' units - shares Finders' units - warrants Allocation on exercise of stock options Shares issued to settle trade and other payables Allocation of flow-through premium Asset retirement obligation Supplementary information Interest paid Income taxes paid	$ $	5,872,431 163,656 43,279 21,597 - 864,738 972,141 - -	$ $	- - - 92,630 7,500 - - -

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

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in Canadian dollars)

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Number of Share Obligation to
shares capital Reserve issue shares Deficit Total
- -
Balance, July 31, 2020 24,042,787 $ 15,592,011 $ $ $ (13,824,077) $ 1,767,934
Issuance of shares for exploration and
evaluation assets 1,202,141 180,321 - - - 180,321
Kismet shares retained 2,000,000 600,000 - - 600,000
- - - -
Kismet options retained 34,195 34,195
- - -
Private placements 17,525,981 6,122,532 6,122,532
- - - -
Allocation of flow-through premium (864,738) (864,738)
Issuance of finders' units 545,519 163,656 - - - 163,656
Share issue costs - finder's units - (206,935) 43,279 - - (163,656)
Share issue costs - cash - (11,282) - - - (11,282)
- -
Exercise of options 133,332 48,263 (21,597) 26,666
Issuance of shares for exploration and
evaluation assets 18,973,699 5,692,110 - - - 5,692,110
- - - -
Share-based compensation 767,657 767,657
- - - -
Obligation to issue shares 425,000 425,000
- - - -
Loss and comprehensive loss for the year (4,831,816) (4,831,816)
Balance, July 31, 2021 64,423,459 $ 27,315,938 $ 823,534 $ 425,000 $ (18,655,893) $ 9,908,579
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	Number of shares	Share capital Reserve Obligation to issue shares Deficit Total
Balance, July 31, 2019 Private placements Allocation of flow-through premium Share issue costs Debt settlements Loss and comprehensive loss for the year	8,459,410 14,685,867 - 280,000 617,533 -	13,306,120 $ - $ 64,000 $ (13,481,128) $ (111,008) $ 2,210,380 - (64,000) - 2,146,380 (7,500) - - - (7,500) (9,619) - - - (9,619) 92,630 - - - 92,630 - - - (342,949) (342,949)
The accompanying notes are an integral part of these consolidated financial statements. Balance, July 31, 2020 24,042,810 15,592,011 $ - $ - $ (13,824,077) $ 1,767,934 $	nying notes are 24,042,810

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

1. NATURE OF OPERATIONS AND GOING CONCERN

TDG Gold Corp. (formerly Kismet Resources Corp.) (the “Company”) is a publicly traded company incorporated pursuant to the provisions of the British Columbia Business Corporations Act on March 14, 2018. The Company trades on the TSX Venture Exchange (“TSX-V”) under the symbol TDG. The Company’s head office and registered and records office address is Unit 1 – 15782 Marine Drive, White Rock, B.C. Canada V4B 1E6.

The Company is engaged in the identification, acquisition, exploration and, if warranted, development of mineral resource projects in British Columbia.

In December 2020, the Company completed a reverse take-over transaction whereby the Company acquired all of the issued and outstanding common shares of TDG BC Assets Corp. (formerly TDG Gold Corp.) (“TDGBC”) by way of a three-cornered amalgamation (“Amalgamation”) between the Company, TDGBC, and 1266834 B.C. Ltd. (“Numco”), a wholly owned subsidiary of the Company. Immediately prior to the completion of the Amalgamation, the Company changed its name from Kismet Resources Corp. to TDG Gold Corp. TDGBC amalgamated with Numco as one company under the name TDG BC Assets Corp., a wholly owned subsidiary of the Company (Note 4).

Pursuant to the Amalgamation, the former shareholders of TDGBC received one share of the Company for every three shares of TDGBC. All share and per share amounts in these consolidated financial statements have been restated to reflect this share consolidation.

In October 2021, the Company entered into a definitive agreement to acquire the Nueva Esperanza project in Chile (Note 19).

These consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business in the foreseeable future. As at July 31, 2021, the Company had working capital of $3,769,773. Subsequent to July 31, 2021, the Company completed a private placement for $4,000,000 (Note 20). Management estimates that these funds may not provide the Company with sufficient financial resources to carry out currently planned exploration and operations through the next twelve months. Additional financing may be required by the Company to complete its strategic objectives and continue as a going concern. While the Company has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms acceptable to the Company. These material uncertainties may cast significant doubt upon the Company’s ability to continue as a going concern.

These financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. Although it is not possible for the Company to fully predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business operations. To date, the Company has been able to raise equity and explore its exploration projects in British Columbia.

1

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

2. BASIS OF PRESENTATION

Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and Interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"). The policies applied in these consolidated financial statements are based on the IFRS issued and outstanding as at the date the Board of Directors approved these financial statements for issue.

Basis of measurement

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

Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the parent company’s functional currency as well as being the functional currency for the Company’s Canadian subsidiary and previously owned Asian subsidiaries.

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

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 and in any future periods affected.

• (i) Critical accounting estimates

Critical accounting estimates are estimates and assumptions made by management that may result in a material adjustment to the carrying amount of assets and liabilities within the next financial year and are, but are not limited to, the following:

The carrying value and the recoverability of exploration and evaluation assets - Management has determined that exploration and evaluation costs incurred which were capitalized may have future economic benefits and may be economically recoverable. Management uses several criteria in its assessments of economic recoverability and probability of future economic benefits including geologic and other technical information, scoping and feasibility studies, accessibility of facilities and existing permits.

2

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

2. BASIS OF PRESENTATION (continued)

Use of estimates and judgments (continued)

(i) Critical accounting estimates

Asset retirement obligations

The Company’s asset retirement obligations represent management’s best estimate of the present value of the future cash outflows required to settle estimated reclamation and closure costs on the Company’s exploration projects. The provision reflects estimates of future costs, inflation and assumptions of risks associated with the future cash outflows, and the applicable interest rates for discounting the future cash outflows. Changes in the above factors can result in a change to the provision recognized by the Company.

Changes to the asset retirement obligations are recorded with a corresponding change to the carrying amounts of related exploration and evaluation assets. Adjustments to the carrying amounts of related mining properties can result in a change to future depletion expense.

Determining if an acquisition is a business combination or an asset acquisition

As required by IFRS 3 Business Combinations (“IFRS 3”), the Company is required to determine whether the acquisition of TDGBC (Note 4) should be accounted for as a business combination or an asset acquisition. Under IFRS 3, the components of a business must include inputs, processes and outputs. Management has determined that TDGBC did not include all the necessary components of a business. Accordingly, the acquisition of TDGBC has been recorded as an acquisition of TDGBC’s net assets, consisting of TDGBC’s exploration and evaluation assets and working capital.

(ii) Critical accounting judgments

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are, but are not limited to, the following:

Going concern – In the determination of the Company’s ability to meet its ongoing obligations and future contractual commitments management relies on the Company’s planning, budgeting and forecasting process to help determine the funds required to support the Company’s normal operations on an ongoing basis. The key inputs used by the Company in this process include forecasted capital deployment, progress on permitting, results from the exploration of its properties and general industry conditions. Changes in these inputs may alter the Company’s ability to meet its ongoing obligations and future contractual commitments and could result in adjustments to the amounts and classifications of assets and liabilities should the Company be unable to continue as a going concern (Note 1).

3

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

3. SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

These consolidated financial statements include the accounts of the Company and its subsidiaries, from the date control was acquired or to the date control was relinquished. Control exists when the Company possesses power over an investee, has exposure to variable returns from the investee and has the ability to use its power over the investee to affect its returns. All inter-company balances and transactions, and any income and expenses arising from inter-company transactions, are eliminated on consolidation.

Name of subsidiary	Place of incorporation	Ownership interest at July 31, 2021	Principal activity
TDG BC Assets Corp.	BC	100%	Mineral exploration company
Locrian Holdings Pte. Ltd. *	Singapore	0%	Holdingcompany
Locrian XiengkhuangPte. Ltd. *	Singapore	0%	Mineral exploration company
Myanmar Exploration Pte. Ltd. *	Singapore	0%	Mineral exploration company
The Representative Office of Locrian Xiengkhuang Pte. Ltd.*	Laos	0%	Mineral exploration company

• Sold in July 2020 (Note 10)

Foreign currency translation

Transactions in foreign currencies are initially recorded in the functional currency by applying exchange rates at the dates of the transactions in the financial statements of each entity in the Company.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are re-translated to the functional currency at the reporting date exchange rate.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are re-translated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on re-translation are recognized in profit or loss.

Equipment

Equipment is recorded at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is recognized in operations on a either a declining balance basis or straight-line basis over the estimated useful lives of each part of an item of equipment, the choice dependant on which most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The depreciation rate for exploration equipment is 20% per annum on a straight-line basis.

An item of equipment is de-recognized upon disposal 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 profit or loss.

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TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Exploration and evaluation assets

Upon acquiring the legal right to explore a mineral property, all direct costs related to the acquisition of exploration and evaluation assets will be capitalized as exploration and evaluation assets. Exploration and evaluation expenditures incurred prior to the acquisition of a mineral project or determination of the feasibility of mining operations and a decision to proceed with development are charged to profit or loss as incurred. Development expenditures incurred subsequent to a development decision, and to increase or to extend the life of existing production, will be capitalized and will be amortized on the unit-of-production method based upon estimated proven and probable reserves. When there is little prospect of further work on a property being carried out by the Company, the remaining deferred costs associated with that property are charged to operations during the period such determination is made.

The Company will assess exploration and evaluation assets for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount.

Restoration, rehabilitation, and environmental obligations

The Company recognizes liabilities for statutory, contractual, constructive, or legal obligations, including those associated with the reclamation of exploration and evaluation assets and property, plant and equipment, when those obligations result from the acquisition, construction, development, or normal operation of the assets. Initially, a liability for an asset retirement obligation is recognized at its fair value in the period in which it is incurred if a reasonable estimate of cost can be made. The Company records the present value of estimated future cash flows associated with reclamation as a liability when the liability is incurred and increases the carrying value of the related assets for that amount.

Impairment

At each statement of financial position reporting date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the assets belong.

The recoverable amount is the higher of fair value less costs to sell and 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 asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

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

5

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial instruments

Financial assets

On initial recognition, financial assets are recognized at fair value and are subsequently classified and measured at: (i) amortized cost; (ii) FVTOCI; or (iii) FVTPL. The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset is measured at fair value net of transaction costs that are directly attributable to its acquisition except for financial assets at FVTPL where transaction costs are expensed. All financial assets not classified and measured at amortized cost or FVTOCI are classified as FVTPL. On initial recognition of an equity instrument that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income/loss.

The classification determines the method by which the financial assets are carried on the statement of financial position subsequent to inception and how changes in value are recorded. Receivables are measured at amortized cost with subsequent impairments recognized in profit or loss. Cash is classified as FVTPL.

Impairment

An ‘expected credit loss’ impairment model applies which requires a loss allowance to be recognized based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognized for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset’s original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognized in profit or loss for the period.

In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

Financial liabilities

Financial liabilities are designated as either: (i) FVTPL; or (ii) amortized cost. All financial liabilities are classified and subsequently measured at amortized cost except for financial liabilities at FVTPL. The classification determines the method by which the financial liabilities are carried on the statement of financial position subsequent to inception and how changes in value are recorded. Trade and other payables are carried on the statement of financial position at amortized cost. The Company does not have any derivative financial liabilities.

Loss per share

The Company presents basic loss per share for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted loss per share does not adjust the loss attributable to common shareholders or the weighted average number of common shares outstanding when the effect is anti-dilutive.

6

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Share capital

The proceeds from the exercise of stock options, warrants and escrow shares are recorded as share capital in the amount for which the option, warrant or escrow share enabled the holder to purchase a share in the Company. The Company’s common shares, share warrants and flow-through shares are classified as equity instruments. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Warrants

The Company accounts for warrants issued in unit offerings comprising a common share and warrant (or portion thereof) using the residual value method. Under this method, one component is measured first, and the residual amount is allocated to the remaining component. The warrant is recorded as share capital if and when the warrants are exercised.

Flow-through shares

The Company may from time to time, issue flow-through common shares to finance its exploration program. Pursuant to the terms of the flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates the flow-through share into i) a flowthrough share premium, equal to the estimated premium, if any, investors pay for the flow-through feature, which is recognized as a liability, and ii) share capital. Upon expenditures being incurred, the Company derecognizes the liability on a pro-rata basis to the expenditures incurred. The reduction of the flow-through share premium previously recorded is recognized as other income.

Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian exploration expenses (as defined in the Tax Act).

The Company may also be subject to a Part XII.6 tax on flow-through proceeds renounced under the Lookback Rule, in accordance with the Tax Act. When applicable, this tax is accrued as a financial expense until paid.

Share-based compensation

The stock option plan allows Company directors, employees, and consultants to acquire shares of the Company. The fair value of options granted is recognized as a share-based compensation expense with a corresponding increase in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee. Consideration paid on the exercise of stock options is credited to share capital and the fair value of the options is reclassified from share-based reserve to share capital.

The fair value is measured at grant date and each tranche is recognized over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the number of stock options that are expected to vest.

Share-based payment arrangements in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions.

7

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Income taxes

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable operations, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

New standards, interpretations, and amendments not yet effective

There are no new standards that will have any significant effect on the Company.

4. REVERSE TAKE-OVER

On December 11, 2020, the Company completed a reverse take-over transaction whereby the Company acquired all of the issued and outstanding common shares of TDGBC by way of a three-cornered amalgamation between the Company, TDGBC, and Numco.

Immediately prior to the completion of the Amalgamation:

• the issued and outstanding common shares of the former Kismet Resources Corp. (“Kismet”) were consolidated on a 2:1 basis.

• the Company changed its name from Kismet Resources Corp. to TDG Gold Corp.

8

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

4. REVERSE TAKE-OVER (continued)

Pursuant to the Amalgamation:

• the Company issued the former shareholders of TDGBC 25,244,928 common shares (one share for every three shares of TDGBC).

• the shareholders of Kismet retained 2,000,000 common shares valued at $600,000.

• the officers of Kismet retained 200,000 options valued at $34,195. The fair value of the options was determined using the Black-Scholes option pricing model with the following assumptions: a risk-free interest rate of 0.25%; an expected volatility of 100%; an expected life of 1-3 years; a forfeiture rate of zero; and an expected dividend of zero.

• TDGBC amalgamated with Numco as one company under the name TDG BC Assets Corp., a wholly owned subsidiary of the Company.

On completion of the Amalgamation, the former shareholders of TDGBC own more shares of the Company than the former shareholders Kismet and accordingly the Amalgamation has been treated as a reverse take-over transaction with the financial statements of TDGBC being the continuing financial statements of the Company and Kismet being the company acquired.

Kismet did not meet the definition of a business under IFRS 3 and accordingly the Company has recorded the purchase of Kismet as an acquisition of net assets at fair value.

The allocation of the cost of acquisition is summarized as follows:

Consideration
Kismet shares retained	$	600,000
Kismet options retained		34,195
Transaction costs		241,126
Total	$	875,321
Net assets(liabilities) received
Cash	$	25,161
Receivables		5,349
Trade and otherpayables		(4,750)
Total	$	25,760
Listing expense	$	849,561

Concurrent with the Amalgamation, the Company completed a private placement for gross proceeds of $4,033,610 (Note 13).

Also, concurrent with the Amalgamation, the Company issued 18,973,699 common shares to Talisker Resources Ltd. to acquire the Baker-Shasta, Mets, and Bot projects (Note 9 and 13).

The common shares of the Company began trading on the TSX-V on December 17, 2020 under the ticker symbol TDG.

9

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended July 31, 2021

(Expressed in Canadian dollars)

5. CASH

	July 31,		July 31,
	2021		2020
Cash	4,253,301 $	$	1,822,505
Cash	allocated for flow-through expenditures 556,968		-
Total	4,810,269 $	$	1,822,505

As at July 31, 2021, the Company had allocated cash of $556,968 in respect of the unspent balance from flowthrough private placements. These funds are allocated for use to advance the Company’s exploration and evaluation assets (Note 9).

6. RECEIVABLES

		July 31,		July 31,
		2021		2020
Amounts due from the Government of Canada
pursuant to goods and services input tax credits	$	125,362 ,	$	19,121
Total	$	125,362	$	19,121

7.

PREPAID EXPENSES

		July 31,		July 31,
		2021		2020
Prepaid exploration and evaluation expenditures	$	201,500	$	63,783
Prepaid insurance		8,750		-
Prepaid investor relations		62,849		-
Total	$	273,099	$	63,783

10

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended July 31, 2021

(Expressed in Canadian dollars)

8. EQUIPMENT

		Exploration
		equipment		Total
Cost
At July 31, 2020 and 2019	$	-	$	-
Additions		251,075		251,075
At July 31, 2021	$	251,075	$	251,075
Accumulated depreciation
At July 31, 2020 and 2019	$	-	$	-
Depreciation		12,554		12,554
At July 31, 2021	$	12,554	$	12,554
Carrying amounts At July 31, 2020	$	-	$	-
At July 31, 2021	$	238,521	$	238,521

9. EXPLORATION AND EVALUATION ASSETS

		Baker-Shasta		Oxide Peak		Total
As at July 31, 2019	$	-	$	-	$	-
Additions - cash		-		15,000		15,000
As at July 31, 2020		-		15,000		15,000
Additions - cash		-		15,000		15,000
Additions - shares		5,692,110		180,321		5,872,431
Additions - ARO		972,141		-		972,141
As at July 31, 2021	$	6,664,251	$	210,321	$	6,874,572

Baker-Shasta Projects

On July 7, 2020, the Company entered into an asset purchase agreement with Talisker Resources Ltd. (“Talisker”) to acquire a 100% interest in the Baker-Shasta, Mets, and Bot projects (collectively the “Baker-Shasta Projects”) located in the Toodoggone region of British Columbia.

The Company completed the acquisition on December 11, 2020 through the issuance to Talisker of 18,973,699 common shares valued at $5,692,110 (Note 13).

Certain of the Baker-Shasta Projects are subject to net smelter return royalties that range from 0.5% to 2.5%.

11

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021

(Expressed in Canadian dollars)

9. EXPLORATION AND EVALUATION ASSETS (continued)

Baker-Shasta Projects (continued)

The allocation of the cost of acquisition is summarized as follows:

Considerationpaid
Common shares issued	$	5,692,110
Total	$	5,692,110
Net assets(liabilities) received
Exploration and evaluation assets	$	6,664,251
Asset retirement obligation(Note 12)		(972,141)
Total	$	5,692,110

Oxide Peak Property

On December 22, 2019, the Company entered into an option and joint venture agreement with ArcWest Exploration Inc. (“ArcWest”) pursuant to which the Company can earn up to an 80% interest in the Oxide Peak property located in the Toodoggone region of British Columbia.

Pursuant to the agreement, the Company issued ArcWest 1,202,141 common shares valued at $180,321 on August 19, 2020 (Note 13).

The Company can earn an initial 60% interest in the Oxide Peak property (the “First Option”) by fulfilling the following terms:

1. Cash payments as follows: o $15,000 on signing (paid);

2. $15,000 on or before December 31, 2020 (paid); and

3. $25,000 on exercise of the First Option.

4. Incurring $2,400,000 of exploration expenditures as follows:

5. $400,000 by December 31, 2020 (incurred);

6. An additional $500,000 by December 31, 2021; and

7. An additional $1,500,000 by December 31, 2022.

Upon exercise of the First Option, the Company can earn an additional 20% interest for a total 80% interest (the “Second Option”) by electing to complete a preliminary economic assessment within two years of exercising the Second Option.

Following the exercise or lapse of the Second Option, the parties will form a joint venture to hold and operate the Oxide Peak property, and each party will fund the costs associated with the Oxide Peak property proportionate to their respective interest. If a party does not contribute its share of the costs, the other party may contribute the shortfall, in which case, the interest of each party in the Oxide Peak property will be adjusted in accordance with a dilution formula. Should the Company’s or ArcWest’s interest be diluted to less than 10%, then that interest will convert to a 2% net smelter return (“NSR”) royalty, of which 1% of the NSR royalty can be bought back for a $2,000,000 cash payment at any time.

12

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

9. EXPLORATION AND EVALUATION ASSETS (continued)

Exploration and evaluation expenditures incurred during the years ended July 31, 2021 and 2020 are as follows:

		Year ended July 31,	Year ended July 31,	Year ended July 31,
		2021		2020
Baker-Shasta, Mets, and Bot
Consulting	$	530,620	$	112,010
Community engagement		285,741		-
Compliance and monitoring		259,372		-
Drilling		224,529		-
Field supplies and other		563,575		1,348
Geophysics		63,402		-
Permitting		92,347		-
Site preparation and maintenance		333,970		-
Travel		98,431		22,591
Oxide Peak
Consulting		151,623		9,872
Community engagement		18,384		-
Travel		127,365		3,334
Total	$	2,749,359	$	149,155

10. DISPOSITION OF SUBSIDIARIES

Locrian Holdings Pte. Ltd., Locrian Xiengkhuang Pte. Ltd., Myanmar Exploration Pte. Ltd., and The Representative Office of Locrian Xiengkhuang Pte. Ltd. (together “Locrian Singapore”) held certain mineral applications in Laos. In July 2020, the Company sold Locrian Singapore, and all associated mineral applications, to a director of the Company for $1 and recorded a gain on disposal of subsidiaries of $34,719 as follows:

==> picture [336 x 129] intentionally omitted <==

----- Start of picture text -----

Consideration received
Cash $ 1
Total $ 1
Net assets (liabilities) sold
Cash $ 29,590
Trade and other payables (64,308)
Total $ (34,718)
Gain on sale of subsidiaries $ 34,719
----- End of picture text -----

13

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

11. TRADE AND OTHER PAYABLES

		July 31,		July 31,
		2021		2020
Trade and other payables in Canada	$	1,156,026	$	131,490
Amounts due to related parties (Note 14)		23,772		20,985
Total	$	1,179,798	$	152,475

12. ASSET RETIREMENT OBLIGATION

	July 31,	July 31,
	2021
Balance, beginning of the year	$	-
Asset retirement obligation		972,141
Accretion		2,146
Balance, end of the year	$	974,287

Provincial laws and regulations concerning environmental protection affect the Company’s exploration and operations. Under current regulations, the Company is required to meet performance standards to minimize the environmental impact from its activities and to perform site restoration and other closure activities. The Company’s provision for future site closure and reclamation costs is based on known requirements.

The Company acquired the Baker-Shasta Projects in December 2020 (Note 9). The Company estimated the present value of the environmental disturbance to be $972,141 based on an undiscounted obligation of $1,027,515, which is expected to be incurred in 2035. The provision was calculated using a weighted average risk-free interest rate of 0.37%, adjusted for inflation.

14

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021

(Expressed in Canadian dollars)

13. SHARE CAPITAL

a) Authorized share capital

The authorized share capital is comprised of an unlimited number of common shares without par value.

b) Issued share capital

On December 11, 2020, the Company consolidated its share capital on a 3:1 basis. All share and per share amounts have been restated to reflect this share consolidation.

During the year ended July 31, 2021, the Company completed the following:

• On August 19, 2020, the Company issued ArcWest 1,202,141 common shares valued at $180,321 pursuant to an agreement on the Oxide Peak property (Note 9).

• Pursuant to the Amalgamation, the shareholders of Kismet retained 2,000,000 common shares valued at $600,000 (Note 4).

• On December 11, 2020, the Company completed a private placement through the issuance of 3,645,000 non-flow-through units at a price of $0.30 per non-flow-through unit and 6,917,907 flowthrough units at a price of $0.425 per flow-through unit for gross proceeds of $4,033,610. Each nonflow-through unit and each flow-through unit consisted of one common share and one-half of one share purchase warrant. Each share purchase warrant is exercisable into one common share of the Company at an exercise price of $0.45 until December 11, 2023.

The Company issued 487,135 non-flow-through units valued at $146,141 to an arm’s length finder in connection with the financing. Each non-flow-through unit consisted of one common share and onehalf of one share purchase warrant on the same terms as the private placement units. The share purchase warrants included in the finder’s units were valued at $39,045 using the Black-Scholes option pricing model with the following assumptions: a risk-free interest rate of 0.25%; an expected volatility of 100%; an expected life of 3 years; a forfeiture rate of zero; and an expected dividend of zero.

The Company recorded a flow-through premium liability of $864,738 on issuance of the flow-through units. The Company is committed to spend the $2,940,110 flow-through funds by December 31, 2021. During the year ended July 31, 2021, the Company spent $2,058,968 of these flow-through funds and accordingly recorded a flow-through premium recovery of $605,579 on the statement of loss and comprehensive loss.

• On December 11, 2020, the Company issued 18,973,699 common shares valued at $5,692,110 to Talisker to acquire the Baker-Shasta, Mets, and Bot projects (Note 9).

• On January 8, 2021, the Company issued 66,666 common shares on the exercise of stock options for gross proceeds of $13,333.

15

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021

(Expressed in Canadian dollars)

13. SHARE CAPITAL (continued)

b) Issued share capital (continued)

• On March 10, 2021, the Company issued 66,666 common shares on the exercise of stock options for gross proceeds of $13,333.

• On March 19, 2021, the Company completed a private placement through the issuance of 6,963,074 units at a price of $0.30 per unit for gross proceeds of $2,088,922. Each unit consisted of one common share and one-half of one share purchase warrant. Each share purchase warrant is exercisable into one common share of the Company at an exercise price of $0.45 until September 19, 2023.

The Company issued 58,384 units valued at $17,515 to an arm’s length finder in connection with the financing. Each unit consisted of one common share and one-half of one share purchase warrant on the same terms as the private placement units. The share purchase warrants included in the finder’s units were valued at $4,234 using the Black-Scholes option pricing model with the following assumptions: a risk-free interest rate of 0.25%; an expected volatility of 100%; an expected life of 2.5 years; a forfeiture rate of zero; and an expected dividend of zero.

The Company also incurred $11,282 of share issue costs.

During the year ended July 31, 2020, the Company completed the following:

• On September 30, 2019, the Company completed a private placement through the issuance of 426,667 common shares at a price of $0.15 per share for gross proceeds of $64,000, all of which was received in fiscal 2019. The Company incurred $1,500 of share issue costs.

• On December 31, 2019, the Company completed a private placement through the issuance of 166,667 flow-through shares at a price of $0.195 per flow-through share for gross proceeds of $32,500. The Company incurred $2,950 of share issue costs. The Company recorded a flow-through premium liability of $7,500 on issuance of the flow-through shares. During the year ended July 31, 2020, the Company spent all of these flow-through funds and accordingly recorded a flow-through premium recovery of $7,500 on the statement of loss and comprehensive loss.

• On March 12, 2020, the Company completed a private placement through the issuance of 2,183,333 common shares at a price of $0.15 per share for gross proceeds of $327,500. The Company incurred $5,169 of share issue costs.

• On March 12, 2020, the Company issued of 617,533 common shares at a price of $0.15 per share to settle trade and other payables of $92,630.

• On July 31, 2020, the Company completed a private placement through the issuance of 11,909,200 common shares at a price of $0.15 per share for gross proceeds of $1,786,380. The Company issued 280,000 common shares valued at $42,000 as a finder’s fee.

c) Escrow shares

As at July 31, 2021, the Company has 17,179,094 common shares held in escrow, to be released 15% every six months.

16

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

13. SHARE CAPITAL (continued)

d) Warrants

The continuity of share purchase warrants for the year ended July 31, 2021, is as follows:

			Balance,				Balance,
	Exercise		July 31,				July 31,
Expiry date		price	2020	Granted	Exercised	Expired	2021
December 11, 2023	$	0.45	-	5,525,021	-	-	5,525,021
September 19,2023	$	0.45	-	3,510,729	-	-	3,510,729
			-	9,035,750	-	-	9,035,750
Weighted average exercise price			- $	0.45 $	$	- $	- 0.45 $

e) Stock options

The Company has a stock option plan (the “Plan”) to be administered by the Board of Directors, which has the discretion to grant options for up to a maximum of 10% of the issued and outstanding share capital amount. Options granted must be exercised no later than ten years from date of grant or such lesser period as determined by the Company’s Board of Directors. The exercise price of an option is not less than the closing price on the TSX-V on the last trading day preceding the grant date. Options vest at the discretion of the Board for directors, officers, employees and consultants, and in equal quarterly intervals over a term of 12 months for investor relations. The Plan further provides that at any such time the TSX-V rules differ from specific terms of the Plan, then the rules of the TSX-V shall apply.

The continuity of stock options for the year ended July 31, 2021, is as follows:

			Balance,				Balance,
	Exercise		July 31,				July 31,
Expiry date		price	2020	Granted	Exercised	Expired	2021
September 19, 2023	$	0.20	-	200,000	(133,332)	-	66,668
February 1, 2026	$	0.35	-	3,487,500	-	-	3,487,500
April 19,2026 *	$	0.50	-	100,000	-	-	100,000
			-	3,787,500	(133,332)	-	3,654,168
Weighted average exercise price			- $	0.35 $	0.20 $	$	- 0.35 $

• the options vest 25% on grant and 25% every three months thereafter.

As at July 31, 2021, 3,604,168 stock options were exercisable.

Pursuant to the Amalgamation (Note 4), the officers of Kismet retained 200,000 options valued at $34,195. The fair value of the options was determined using the Black-Scholes option pricing model with the following assumptions: a risk-free interest rate of 0.25%; an expected volatility of 100%; an expected life of 1-3 years; a forfeiture rate of zero; and an expected dividend of zero.

17

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

13. SHARE CAPITAL (continued)

f) Share-based compensation

On February 1, 2021, the Company granted 3,487,500 stock options to directors, officers, and consultants exercisable at a fair value of $750,603 or $0.22 per option, all of which was recorded as share-based compensation for the year ended July 31, 2021. The fair value of the options granted was determined using the Black-Scholes option pricing model with the following assumptions: a risk-free interest rate of 0.25%; an expected volatility of 100%; an expected life of 5 years; a forfeiture rate of zero; and an expected dividend of zero.

On April 19, 2021, the Company granted 100,000 stock options to an investor relations consultant exercisable at a fair value of $29,590 or $0.30 per option, of which $17,054 was recorded as share-based compensation for the year ended July 31, 2021. The fair value of the options granted was determined using the Black-Scholes option pricing model with the following assumptions: a risk-free interest rate of 0.25%; an expected volatility of 100%; an expected life of 5 years; a forfeiture rate of zero; and an expected dividend of zero.

14. RELATED PARTY TRANSACTIONS

Compensation of key management personnel

Key management includes the Chief Executive Officer, the Chief Financial Officer, and the Corporate Secretary. The aggregate compensation paid, or payable, to key management personnel during the years ended July 31, 2021 and 2020 were as follows:

		Year ended July 31,	Year ended July 31,	Year ended July 31,
		2021		2020
Consulting fees
Chief Executive Officer	$	210,000	$	10,000
Golden Oak *		105,000		11,000
Share-based compensation		581,112		-
Total	$	896,112	$	21,000

• Golden Oak Corporate Services Ltd. (“Golden Oak”) is a consulting company controlled by the Chief Financial Officer and the Corporate Secretary of the Company. The Chief Financial Officer and the Corporate Secretary are employees of Golden Oak and are not paid directly by the Company.

Amounts due to related parties

As at July 31, 2021, the Company owed $23,772 (2020 – $20,985) to related parties as follows: $21,000 to the Chief Executive Officer for fees, and $2,772 to Golden Oak for the reimbursement of expenses. All amounts owed are unsecured and non-interest bearing.

18

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021

(Expressed in Canadian dollars)

15. SEGMENTED INFORMATION

IFRS 8 “Operating Segments” requires operating segments to be identified on the basis of internal reports that are regularly reviewed by the chief operating decision-maker to allocate resources to the segments and to assess their performance.

The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments, has been defined as the Chief Executive Officer.

The Company operates in a single segment, being mineral exploration and evaluation.

All of the Company’s capital assets are located in Canada as at July 31, 2021 and 2020.

16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Financial Instruments

Financial instruments are classified into one of the following categories: FVTPL; FVTOCI; or at amortized cost. The carrying values of the Company’s financial instruments are classified into the following categories:

July 31,	July 31,
2021	2020
Cash FVTPL 4,810,269 $ Receivables Amortized cost 125,362 Trade and other payables Amortized cost (1,179,798)	1,822,505 $ 19,121 (152,475)

The Company’s financial instruments recorded at fair value require disclosure about how the fair value was determined based on significant levels of inputs described in the following hierarchy:

• Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and value to provide pricing information on an ongoing basis.

• Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the market place.

• Level 3 - Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.

The carrying values of receivables and trade and other payables approximate their fair values due to their shortterm nature. These financial instruments are classified as financial assets and liabilities at amortized cost and are reported at amortized cost. The carrying value of cash was determined based on Level 1 of the fair value hierarchy.

19

TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Risk management

The Company’s risk exposures and the impact on the Company’s financial instruments are summarized as follows:

Credit Risk

Credit risk is the risk of potential loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations. The Company’s credit risk is primarily attributable to its liquid financial assets, including cash and receivables. The Company limits the exposure to credit risk in its cash by only investing its cash with high-credit quality financial institutions in business and savings accounts, guaranteed investment certificates and in government treasury bills which are available on demand by the Company for its programs. The Company`s receivables include balances receivable from the government of Canada.

Liquidity Risk

Liquidity risk is the risk that the Company will not have the resources to meet its obligations as they fall due. The Company manages this risk by closely monitoring cash forecasts and managing resources to ensure that there is sufficient capital in order to meet short-term business requirements. All of the Company’s financial liabilities are classified as current and are anticipated to mature within the next sixty days. The Company is exposed to liquidity risk.

Market Risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity, political risk, and equity prices. These fluctuations may be significant.

• (a) Interest Rate Risk: The Company is exposed to interest rate risk to the extent that its cash balances bear variable rates of interest. The interest rate risks on cash and on the Company’s obligations are not considered significant.

• (b) Commodity Price Risk: While the value of the Company’s exploration and evaluation assets will be related to the price of gold and the outlook for this mineral, the Company currently does not have any operating mines and hence does not have any hedging or other commodity based risks in respect to its operational activities.

Historically, the price of gold has fluctuated significantly and is affected by numerous factors outside of the Company’s control, including but not limited to industrial and retail demand, central bank lending, forward sales by producers and speculators, levels of worldwide production, short-term changes in supply and demand because of speculative hedging activities, and certain other factors related specifically to gold.

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TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

17. MANAGEMENT OF CAPITAL

The Company manages its common shares as capital. The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the acquisition of exploration and evaluation assets and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk. The Company is not subject to externally imposed capital requirements.

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 the capital structure, the Company may attempt to issue new shares, issue debt, acquire or dispose of assets, or adjust the amount of cash.

In order to facilitate the management of its capital requirements, the Company prepares expenditure forecasts that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. In order to maximize ongoing exploration efforts, the Company does not pay out dividends.

The Company’s investment policy is to keep its cash treasury on demand deposit in an interest bearing Canadian chartered bank account. The Company estimates that its current capital resources will be sufficient to carry out its currently planned exploration and operations through the next twelve months (Note 1).

There have been no changes to the Company’s approach to capital management for the years presented.

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TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021

(Expressed in Canadian dollars)

18. INCOME TAXES

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

		Year ended July	Year ended July	31,
		2021		2020
Loss for theyear	$	(4,831,816)	$	(342,949)
Expected income tax recovery	$	(1,305,000)	$	(93,000)
Change in statutory, foreign tax, foreign exchange rates and other		(308,000)		(1,002,000)
Permanent differences		438,000		1,004,000
Impact of flow-through share issuances		525,000		-
Share issue costs		(49,000)		(3,000)
Adjustment to prior years provision versus statutory tax returns		(1,285,000)		-
Change in unrecognized deductible temporarydifferences		1,984,000		94,000
Total	$	-	$	-

The significant components of the Company’s deferred tax assets are as follows:

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July 31, July 31,
2021 2020
Deferred tax assets (liabilities)
Exploration and evaluation assets $ 596,000 $ 354,000
-
Equipment 99,000
Share issue costs 57,000 2,000
-
Capital losses 1,375,000
Non-capital losses available for future periods 770,000 557,000
Total unrecognized deferred tax assets $ 2,897,000 $ 913,000
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Deferred tax assets have not been recognized in these financial statements as it is not probable that they will be realized.

The significant components of the Company’s unrecognized temporary differences and tax losses are as follows:

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July 31,
2021 Expiry date range
Temporary differences
Exploration and evaluation assets $ 2,208,000 No expiry date
Equipment 367,000 No expiry date
Share issue costs 210,000 2042 to 2046
Capital losses 5,091,000 No expiry date
Non-capital losses available for future periods 2,855,000 2033 to 2041
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Tax attributes are subject to review, and potential adjustment, by tax authorities.

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TDG GOLD CORP. (FORMERLY KISMET RESOURCES CORP.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended July 31, 2021 (Expressed in Canadian dollars)

19. PROPOSED TRANSACTION

On October 13, 2021, the Company entered into a binding definitive agreement, as amended, with Kingsgate Consolidated Limited (“Kingsgate”) to acquire the Nueva Esperanza silver-gold project in Chile. Under the terms of the agreement, in exchange for 100% ownership of Kingsgate’s Chilean subsidiary that holds the Nueva Esperanza project, the Company will pay to Kingsgate the following consideration:

• $25,000,000 cash on closing, subject to certain working capital and other adjustments.

• 14% of the Company’s outstanding common shares calculated on a post-closing basis (inclusive of any shares issued in a concurrent financing).

• Up to $25,000,000 in future milestone payments, subject to certain adjustments, of which up to $10,000,000 may be settled in common shares of the Company at the Company’s discretion, with the applicable milestones as follows:

• a cash payment of $6,250,000 on or before the date that is three months following the date that the Company completes a feasibility study in respect of the Nueva Esperanza project;

• at the Company’s election, either a cash payment of $5,000,000 or the issuance of 10,000,000 common shares on or before the date that a construction decision is made in respect of the Nueva Esperanza project;

• at the Company’s election, either a cash payment of $5,000,000 or the issuance of 10,000,000 common shares on or before the first anniversary of the commencement of commercial production at the Nueva Esperanza project, as defined in the agreement (“Commercial Production”); and

• A cash payment of $8,750,000 on or before the second anniversary of Commercial Production.

As a condition to the closing of the acquisition, the Company has agreed to raise a minimum of $35,000,000 in an equity financing (the “Concurrent Financing”).

The proposed acquisition is subject to TSX-V review and approval as well as other conditions precedent, including the completion of the Concurrent Financing. Subject to receiving confirmed orders to the Concurrent Financing in the amount of at least $35,000,000 and the payment by the Company of a non-refundable deposit to Kingsgate in the amount of $1,500,000, of which $500,000 was paid on November 9, 2021 and $1,000,000 was paid on November 29, 2021. In addition, the Company agreed to reimburse Kingsgate for holding costs incurred for the Nueva Esperanza silver-gold project as a result of the extension of time under the Agreement from October 31, 2021 to January 31, 2022.

During the year ended July 31, 2021, the Company recorded $298,501 of project investigation costs consisting of costs directly related to this transaction.

20. SUBSEQUENT EVENT

On August 13, 2021, the Company completed a private placement through the issuance of 2,000,000 non-flowthrough shares at a price of $0.50 per non-flow-through share and 4,444,444 flow-through shares at a price of $0.675 per flow-through share for gross proceeds of $4,000,000. The Company paid $160,275 in cash finder’s fees. During the year ended July 31, 2021, the Company received $425,000 of the gross proceeds and recorded the proceeds as an obligation to issue shares as at July 31, 2021.

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