Tectonic Metals Inc. — Interim / Quarterly Report 2021

Nov 24, 2021

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2021 and 2020

(Expressed in Canadian Dollars) (Unaudited)

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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars) (unaudited)

As at

Note	September 30, 2021	December 31, 2020
ASSETS Current Cash Receivables Prepaids Equipment 5 Exploration and evaluation assets 6 LIABILITIES Current Trade and other payables Lease liability 9 Lease liability – long term 9 SHAREHOLDERS’ EQUITY Share capital 7 Reserves 7 Deficit	$ 3,369,741 118,985 183,570 3,672,296 70,744 549,492 $ 4,292,532 $ 1,278,272 27,168 1,305,440 17,143 1,322,583 22,740,603 4,002,367 (23,773,021) 2,969,949 $ 4,292,532	$ 3,423,212 8,442 92,822 3,524,476 94,388 534,194 $ 4,153,058 $ 243,042 24,830 267,872 37,771 305,643 17,681,401 1,965,785 (15,799,771) 3,847,415 $ 4,153,058

Nature of operations and going concern (Note 1)

Approved on behalf of the Board:

“Antonio Reda” “Michael Roper”

Antonio Reda Michael Roper

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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS (Expressed in Canadian Dollars) (unaudited)

Note	3 months ended September 30, 2021	3 months ended September 30, 2020	9 months ended September 30, 2021	9 months ended September 30, 2020
EXPENSES Accounting & legal Depreciation 5 Employee benefits & salary 8 Exploration expenses 6,8 Finance cost 9 Foreign exchange loss General & administration Insurance Marketing & corporate development Share-based compensation 7, 8 Transfer agent & filing fees Travel & meals Impairment 6 Loss and comprehensive loss for the period Basic and diluted loss per common share Weighted average number of common shares outstanding	$ 148,936 11,849 134,800 4,944,495 1,214 31,536 41,611 12,168 73,159 66,410 17,040 2,953 (5,486,171) 135,564 $ (5,621,735) $ (0.03) 161,677,735	$ 51,056 10,002 153,779 2,446,615 1,507 57,188 30,381 9,938 94,173 130,453 34,484 934 (3,020,510) - $ (3,020,510) $ (0.03) 90,142,175	$ 287,938 32,181 572,788 6,207,574 4,573 24,844 129,414 36,182 196,509 291,632 42,902 11,149 (7,837,686) 135,564 $ (7,973,250) $ (0.07) 115,940,235	$ 181,708 28,723 449,574 2,891,370 2,338 102,197 101,836 29,572 318,620 373,841 83,496 9,423 (4,572,698) - $ (4,572,698) $ (0.07) 69,751,786

2

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Expressed in Canadian Dollars) (unaudited)

	SHARE CAPITAL	SHARE CAPITAL	RESERVES	RESERVES
		Number Amount	Warrants Restricted Shares Stock Options	Deficit Total
At December 31, 2019 Share and share purchase warrants issued for cash Shares issued for dataset acquisition Share purchase warrants issued for finders’ fees Share issue costs Restricted share forfeit Share based compensation Loss for the period		55,203,675 $ 12,065,407 35,088,500 5,981,663 300,000 73,500 - (150,972) - (288,197) (450,000) - - - - -	$ 71,034 $ 223,490 $ - 1,036,037 - - - - - 150,972 - - - - - - - - - 365,082 8,759 - - -	$ (10,417,375) $ 1,942,556 - 7,017,700 - 73,500 - - - (288,197) - - - 373,841 (4,572,698) (4,572,698)
At September 30, 2020		90,142,175 $ 17,681,401	$ 1,258,043 $ 588,572 $ 8,759	$ (14,990,073) $ 4,546,702
At December 31, 2020 Share issued for private placement Share issue costs Share purchase warrants issued for finders’ fees Share based compensation Loss for the period		89,917,175 $ 17,681,401 71,760,560 5,623,484 - (371,904) - (192,378) - - - -	$ 1,258,043 $ 686,641 $ 21,101 1,552,572 - - - - 192,378 - - - 249,609 42,023 - - -	$ (15,799,771) $ 3,847,415 - 7,176,056 - (371,904) - - - 291,632 (7,973,250) (7,973,250)
At September 30, 2021		161,677,735 $ 22,740,603	$ 3,002,993 $ 936,250 $ 63,124	$ (23,773,021) $ 2,969,949

Share Capital (Note 7)

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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

(Expressed in Canadian Dollars) (unaudited)

	9 months ended September 30, 2021	9 months ended September 30, 2020
OPERATING ACTIVITIES Loss for the period Items not involving cash: Depreciation Foreign exchange Finance cost Impairment Share based compensation Shares issued for dataset acquisition Changes in non-cash working capital items: (Increase) decrease in receivables (Increase) decrease in other current assets Decrease in trade and other payables Cash used in operating activities INVESTING ACTIVITIES Exploration and evaluation assets Equipment Cash used in investing activities FINANCING ACTIVITIES Proceeds from share and share purchase warrant issuances Share issuance costs Lease payments Cash provided by financing activities Effect of foreign exchange on cash Change in cash during the period Cash—beginning of period Cash—end of period	$ (7,973,250) 32,181 (16,652) 4,103 135,564 291,632 (110,543) (90,748) 998,168 (6,729,545) (113,803) (8,537) (122,340) 7,176,056 (371,904) (22,392) 6,781,760 16,654 (53,471) 3,423,212 $ 3,369,741	$ (4,572,698) 28,723 112,730 3,448 - 373,841 73,500 17,085 115,717 1,003,689 (2,843,965) (160,975) (4,175) (165,150) 7,017,700 (288,197) (21,789) 6,707,714 (97,610) 3,600,989 1,791,241 $ 5,392,230

Supplemental cash flow information (Note 10)

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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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01 NATURE OF OPERATIONS AND GOING CONCERN

Tectonic Metals Inc. (the “Company”) was incorporated on April 7, 2017 under the laws of under the British Columbia Business Corporations Act. The Company’s head office is at 312-744 West Hastings Street, Vancouver, British Columbia, V6C 1A5.

The Company’s principal business activities include the acquisition and exploration of mineral exploration and evaluation assets in the United States and Canada. The Company has not yet determined whether its exploration and evaluation assets contain ore reserves that are economically recoverable. The recoverability of the amounts shown for exploration and evaluation assets are dependent upon the existence of economically recoverable reserves, the ability of the Company to obtain necessary financing to complete the development of those reserves and upon future profitable production. To date, the Company has not earned any revenues and is considered to be in the exploration stage.

These condensed interim consolidated financial statements (the “Financial Statements”) have been prepared assuming the Company will continue on a going-concern basis. The Company has incurred losses since its inception and the ability of the Company to continue as a going-concern depends upon its ability to raise adequate financing and to develop profitable operations. These Financial Statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue operations.

The continuance of the Company’s operations is dependent on obtaining sufficient additional financing to realize the recoverability of the Company’s investments in exploration and evaluation assets which is dependent upon the existence of economically recoverable reserves and market prices for the underlying minerals. Management closely monitors metal commodity prices, individual equity movements and the stock market to determine the appropriate course of action to be taken by the Company if favorable or adverse market conditions occur. Management estimates it has sufficient funds to continue operations for the next 12 months.

On November 18, 2019, the Company listed all of the Company’s outstanding common shares on the Toronto Venture Stock Exchange (the “TSXV”) under the stock symbol “TECT”. On July 23, 2020, the Company’s common shares began trading on the OTCQB under the symbol “TETOF”. During the period ended September 30, 2021, the Company’s common shares began trading on the Frankfurt Stock Exchange under the symbol “T15B”.

The outbreak of the coronavirus, also known as COVID-19, continues to impact worldwide economic activity. The extent to which the coronavirus may impact the Corporation’s business activities will depend on future developments, such as the ultimate geographic spread of the disease, duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in Canada and other countries to contain and treat the disease. These events are highly uncertain and, as such, the Company cannot determine their long-term financial impact at this time. Federal, provincial and local governments have issued public health orders in response to COVID 19, which may cause some delay in the Corporation’s operations.

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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02 BASIS OF PREPARATION

Statement of Compliance

These Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”) applicable to the preparation of interim financial statements including International Accounting Standard 34: Interim Financial Reporting. Accordingly, certain disclosures included in annual financial statements prepared in accordance with IFRS have been condensed or omitted. These Financial Statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2020.

The accounting policies applied in the preparation of these Financial Statements are consistent with those applied and disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2020. The Company’s interim results are not necessarily indicative of its results for a full year.

Approval of the Financial Statements

These Financial Statements were authorized for issue by the Board of Directors of the Company on November 22, 2021.

Basis of Presentation

These Financial Statements have been prepared on a historical cost basis. In addition, these Financial Statements have been prepared using the accrual basis of accounting, except for cash flow information.

Certain of the prior period figures have been reclassified to conform with the current period presentation.

Functional and Presentation Currency

These consolidated financial statements are presented in Canadian dollars unless otherwise noted, which is the functional currency of the parent and its subsidiaries.

Basis of Consolidation

These consolidated financial statements of the Company include the accounts of the Company and its whollyowned U.S. subsidiaries, District Metals LLC and Tectonic Resources LLC, the principal activity of which is exploration in the United States. Subsidiaries are fully consolidated from the date the Company obtains control and continue to be consolidated until the date that control ceases. Control is achieved when the Company is exposed to or has the right to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. All inter-company transactions and balances have been eliminated upon consolidation.

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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03 KEY SOURCES OF ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING JUDGMENTS

The preparation of the Company’s Financial Statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Financial Statements and reported amounts of expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.

Information about significant areas of estimation uncertainty and judgments made by management in preparing the Financial Statements are described below:

Estimates

ECONOMIC RECOVERABILITY AND PROBABILITY OF FUTURE ECONOMIC BENEFITS OF EXPLORATION AND EVALUATION ASSETS

Management has determined that exploration, evaluation, and related 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, a history of conversion of mineral deposits with similar characteristics to its own properties to proven and probable mineral reserves, the quality and capacity of existing infrastructure facilities, evaluation of permitting and environmental issues and local support for the project.

VALUATION OF RIGHT OF USE ASSET AND LEASE LIABILITY

In determining the valuation of the right of use asset and lease liability, the Company is required to make judgements regarding the interest rate used for discounting future cash flows. The present value of the lease liability was determined using the estimated incremental borrowing rate of the Company.

SHARE-BASED COMPENSATION AND ISSUANCE OF UNITS

The Company issued restricted shares and stock options that vest over time. In consideration of IFRS 2, the Company determines the fair value at issuance and will recognize amounts over the vesting period to equity and share-based compensation based on the share value at the time of issuance. The Company also issued units under private placements and has used the Black-Scholes option pricing model (“BSM”) to determine the relative fair value of the warrant portion.

VALUE OF EXPLORATION AND EVALUATION ASSETS

The carrying value of the Company’s exploration and evaluation assets is reviewed by management at least annually, or whenever events or circumstances indicate that its carrying value may not be recovered.

ASSET RETIREMENT OBLIGATION

In determining the valuation of a reclamation liability, the Company is required to make judgements regarding the interest rate used to discount future cash flows, number of labour hours required, and costs for labour and equipment rental.

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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Judgements

DETERMINATION OF FUNCTIONAL CURRENCY

The Company determines the functional currency through an analysis of several indicators of autonomy such as financing activities, expenses and cash flow, retention of operating cash flows, and frequency of transactions with the reporting entity.

GOING CONCERN

In assessing its ability to continue as a going concern for the next twelve months, the Company estimates future cash outflows based off prevailing market prices for goods and services, foreign exchange rates, and number of days to complete field programs with weather constraints.

04 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Financial instruments measured at fair value are classified into one of three levels in fair value hierarchy according to the relative reliability of inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities

Level 2: Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly

Level 3: Inputs that are not based on observable market data

The Board of Directors has the overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s financial instruments consist of cash, accounts receivable, and trade and other payables. The fair value of cash is measured on the statement of financial position using Level 1 of the fair value hierarchy. The fair value of receivables and trade and other payables approximate their book values due to the short-term nature of these instruments.

Financial Risk Factors

The Company is exposed to a variety of financial risks by virtue of its activities including credit, liquidity, interest rate, foreign currency, and price risk.

CREDIT RISK

The Company is exposed to industry credit risks arising from its cash and receivables. The Company manages credit risk by holding cash with major Canadian financial institutions. The Company’s receivables are due from the Federal Government of Canada. Management believes that credit risk related to these amounts is nominal.

LIQUIDITY RISK

Liquidity risk is the risk that the Company will not have sufficient funds to meet its financial obligations when they are due. To manage liquidity risk, the Company has in place a planning and budgeting process to help determine the funds required to support the Company’s operating requirements on an ongoing basis and assess available and required sources of additional capital and financing.

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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INTEREST RATE RISK

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to interest rate risk as it does not have any significant financial instruments with interest rates, with the exception of cash. Interest earned on cash is based on prevailing bank account interest rates, which may fluctuate. A 1% change in interest rates would result in a nominal difference for the period ended September 30, 2021.

FOREIGN CURRENCY RISK

The Company is exposed to nominally foreign currency risk on fluctuations related to cash and trade and other payables that are denominated in United States Dollars.

PRICE RISK

The Company has exposure to price risk with respect to commodity and equity prices. Equity price risk is defined as the potential adverse impact on the Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company monitors the price of precious metals.

05 EQUIPMENT

For the nine months ended September 30, 2021

	COST ACCUMULATED DEPRECIATION	COST ACCUMULATED DEPRECIATION	COST ACCUMULATED DEPRECIATION
	Opening Additions Ending	Opening Depreciation Ending	Net Book Value
Mining equipment Office & furniture Computer equipment Right of use asset	$ 22,686 $ - $ 22,686 17,866 - 17,866 25,786 8,423 34,209 77,450 - 77,450	$ (13,009) (6,859) (19,868) (7,236) (2,392) (9,628) (11,855) (3,596) (15,451) (17,186) (19,334) (36,520)	2,818 8,238 18,758 40,930
Total	$ 143,788 $ 8,423 $ 152,211	$ (49,286) (32,181) (81,467)	70,744

For the year ended December 31, 2020

	COST ACCUMULATED DEPRECIATION	COST ACCUMULATED DEPRECIATION	COST ACCUMULATED DEPRECIATION
	Opening Additions Ending	Opening Depreciation Ending	Net Book Value
Mining equipment Office & furniture Computer equipment Right of use asset	$ 22,685 $ - $ 22,685 17,866 - 17,866 21,611 4,175 25,786 - 77,450 77,450	$ (8,862) $ (4,147) $ (13,009) (2,680) (4,556) (7,236) (6,780) (5,075) (11,855) - (17,299) (17,299)	$ 9,676 10,630 13,931 60,151
Total	$ 62,162 $ 81,625 $ 143,787	$ (18,322) $ (31,077) $ (49,399)	$ 94,388

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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06 EXPLORATION AND EVALUATION ASSETS

Carrying Amount

The following table represents acquisition costs incurred on the exploration and evaluation assets:

	Flat, USA	Tibbs, USA	Seventymile, USA	Northway, USA	Maple Leaf, USA	Carrie Creek & Mt. Harper, USA	Total
At December 31, 2019 Cash property payments At December 31, 2020 Cash property payments Impairment	$ - - $ - 37,059 -	$ 181,907 67,145 $ 249,052 62,875 -	$ 79,692 38,964 $ 118,656 38,196 -	$ 95,643 39,921 $ 135,564 - (135,564)	$ 15,977 - $ 15,977 - -	$ - 14,945 $ 14,945 12,732 -	$ 373,219 160,975 $534,194 150,862 (135,564)
At September 30, 2021	$ 37,059	$ 311,927	$ 156,852	$ -	$ 15,977	$ 27,677	$549,492

Expenditures

Details of the Company’s exploration and evaluation expenditures are as follows:

								For the 3
								months
								ended
				Carrie Creek /		Project	Project	September
	Tibbs	Seventymile	Flat	Mt. Harper	Other	Generation	Support	30, 2021
Drilling program	$ 3,254,966	$ 0	$ -	$ 842,098	$ -	$ -	$ -	$ 4,097,064
Geological consulting	24,265	577	-	-	-	-	-	24,842
Mapping program	6,261	69	2,625	253,456	8,956	-	-	271,367
Other	30,743	11,279	-	16,643	461	-	305	59,431
Registration fees	-	-	-	-	18,863	-	-	18,863
Salary & legal costs	45,570	1,630	6,988	15,643	1,066	-	-	70,897
Scholarship fees	-	-	12,353	-	-	-	-	12,353
Surveying program	378,309	3,820	-	6,971	322	-	256	389,678
Total exploration expenditures	$ 3,740,114	$ 17,375	$ 21,966	$1,134,811	$ 29,668	$ -	$ 561	$4,944,495

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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									Carrie					For the 3
							Maple	Creek / Mt.			Project	Project	months ended
		Tibbs		Seventymile	Northway		Leaf		Harper	Generation		Support	Sept 30, 2020
Computer software	$	2,161	$	5,273	$ 1,414	$	225	$	174	$	-	$ 2,725	$	11,972
Drilling program		937,916		1,091,528	-		-		-		-	-		2,029,444
Geological consulting		-		200	-		-		200		26,905	400		27,705
Mapping program		19,868		12,375	-		26,290		18,379		-	284		77,196
Other		5,123		797	334		53		1,490			222		8,019
Reclamation		(7,400)		20,000	-		-		-		-	-		12,600
Registration fees		6,300		75	1,855		2,910		75		-	-		11,215
Salary & legal costs		28,187		29,141	576		2,056		2,413		1,698	7,672		71,743
Sampling program		102,302		-	-		-		-		-	-		102,302
Scholarship fees		-		-	-		-		13,404		-	-		13,404
Surveying program		81,015		-	-		-		-		-	-		81,015
Total exploration expenditures	$	1,175,472	$	1,159,389	$ 4,179	$	31,534	$	36,135	$	28,603	$11,303	$	2,446,615

								For the 9
								months
								ended
				Carrie Creek /		Project	Project	September
	Tibbs	Seventymile	Flat	Mt. Harper	Other	Generation	Support	30, 2021
Drilling program	$ 4,083,279	$ 1,417	$ -	$ 843,515	$ -	$ -	$ -	$ 4,928,211
Geological consulting	50,722	57,189	-	3,051	4,405	26,941	142	142,450
Mapping program	9,148	1,350	2,625	281,067	10,248	-	-	304,438
Other	98,175	29,281	-	18,927	2,207	505	714	149,809
Registration fees	561	-	-	1,123	39,599	-	-	41,283
Salary & legal costs	94,351	16,899	6,988	19,719	3358	3,115	57,221	201,651
Sampling program	1,243	100	-	-	-	-	731	2,074
Scholarship fees	-	30,713	12,353	-	-	-	-	43,066
Surveying program	379,230	4,164	-	10,290	652	-	256	394,592
Total exploration expenditures	$ 4,716,709	$ 141,113	$ 21,966	$1,177,692	$ 60,469	$ 30,561	$ 59,064	$6,207,574

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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									Carrie
									Creek /						For the 9
							Maple		Mt.		Project		Project	months ended
		Tibbs		Seventymile	Northway		Leaf		Harper	Generation			Support	Sept 30, 2020
Computer software	$	4,539	$	10,280	$ 7,945	$	299	$	174	$	6,670	$	5,915	$	35,822
Drilling program		941,147		1,094,052	-		-		-		-		-		2,035,199
Geological consulting		450		950	300		-		200		49,543		4,450		55,893
Geologist dataset acquisition		7,350		-	-		44,100		-		22,050		-		73,500
Mapping program		19,868		12,375	-		26,290		18,379		-		284		77,196
Other		6,941		2,928	2,630		414		1,490		196		748		15,347
Reclamation		(7,400)		20,000	-		-		-		-		-		12,600
Registration fees		25,161		263	27,316		13,905		75		-		1,283		68,003
Salary & legal costs		43,711		77,892	19,160		9,310		2,413		39,035		89,245		280,766
Sampling program		103,244		-	4,216		-		-		-		-		107,460
Scholarship fees		-		35,165	-		-		13,404		-		-		48,569
Surveying		81,015		-	-		-		-		-		-		81,015
Total exploration expenditures	$	1,226,026	$	1,253,905	$ 61,567	$	94,318	$	36,135	$	117,494	$101,925		$	2,891,370

Property Agreements

NORTHWAY

In June 2018 and subsequently amended January 1, 2020, the Company entered into a mining lease agreement with Doyon, Limited (“Doyon”), an Alaska Native Regional Corporation, for a 100% interest in an area of the Alaska Native regional corporation mineral estate in the southern Fortymile Mining District, Alaska (the “Northway Property”). The lease covers the mineral estate and a portion of the surface estate and grants the Company rights to conduct mineral exploration and, if warranted, mineral development and production activities. Doyon is granted a 2% net smelter returns royalty (“NSR”) for precious minerals and a 1% NSR for base minerals until the end of the fourth year of commercial production. Doyon is granted a 4% NSR for precious minerals and a 3% NSR for base minerals from the fifth to tenth anniversary of commercial production. After the tenth anniversary of commercial production, the production royalty for precious minerals is the greater of a 4% NSR or 15% of net proceeds and the production royalty for base minerals is the greater of a 3% NSR or 15% of net proceeds. The initial lease term is for fifteen years, and the lease agreement included renewal clauses to extend the lease period up to the entire operational period of a mine.

In consideration the Company paid Doyon $119,613 ($90,000 USD) to December 31, 2020, and was required to make annual payments totaling $590,000 USD through to 2028 and an additional $600,000 USD payment upon the completion of a feasibility study. In addition, the Company was required to make minimum exploration expenditures on the property.

During the nine months ended September 30, 2021, the Company terminated the agreement with Doyon on the Northway property and as a result incurred an impairment charge of $135,564.

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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SEVENTYMILE

In June 2018, the Company entered into a mining lease agreement with Doyon for a 100% interest in the area of the Alaska Native regional corporation mineral estate in the Eagle Mining District, Alaska (the “Seventymile Property”). The lease covers the mineral estate and the surface estate and grants the Company rights to conduct mineral exploration and, if warranted, mineral development and production activities. Doyon is granted a 2% NSR for precious minerals and a 1% NSR for base minerals until the end of the fourth year of commercial production. Doyon is granted a 4% NSR for precious minerals and a 3% NSR for base minerals from the fifth to tenth anniversary of commercial production. After the tenth anniversary of commercial production, the production royalty for precious minerals is the greater of a 4% NSR or 15% of net proceeds and the production royalty for base minerals is the greater of a 3% NSR or 15% of net proceeds. The initial lease term is for fifteen years, and the lease agreement includes renewal clauses to extend the lease period up to the entire operating operation period of a mine.

In consideration, the Company paid Doyon $118,656 ($90,000 USD) to December 31, 2020 and $38,196 in January 2021 ($30,000 USD) and pursuant to the lease agreement is required to pay:

• I. $60,000 USD each January 2022–2027;

• II. $200,000 USD each January 2028 and thereafter. If the Company exercises an option to extend the lease term by another five years after completion of a feasibility study, this annual payment shall be increased to $300,000 USD; and

• III. $600,000 USD upon completion of a feasibility study.

Pursuant to the option agreement, the Company is required to incur the following amounts for exploration expenditures on the Seventymile Property:

Calendar Years	Amount of exploration expenditures (USD$)
2018 (commitment fully met)	400,000
2019 (commitment fully met)	600,000
2020–2023 (commitment fully met)1	750,000
2024–2027	1,500,000
2028 and each calendar year thereafter	2,000,000

1. Eligible expenditures include all actual, direct costs, expenses, and charges related to exploration and development conducted on or for the benefit of the Seventymile Property, including without limitation costs and expenses off the property and reasonably allocated to operations on the property. The Company is permitted to carry forward excess expenditures and apply them against a future year.

Additionally, the Company contributes to the Doyon Foundation, a $25,000 USD scholarship each May for the term of the lease. The scholarship amount increases to $50,000 USD each year following the commencement of commercial production at the Seventymile Property. The Company paid Doyon $30,713 ($25,000 USD) for a scholarship payment during the nine months ended September 30, 2021.

13

Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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TIBBS

In June 2017, the Company entered into a mining lease and option agreement with Tibbs Creek Gold, LLC. (“Tibbs”) for a 100% interest in the surface and subsurface rights to State of Alaska Mining Claims in the Fairbanks Recording District, Alaska (the “Tibbs Property”). The agreement grants Tibbs a 2.5% NSR, of which 1.5% can be purchased for $1,500,000 USD. The initial term of the lease is ten years.

In consideration the Company paid Tibbs a total of $301,973 ($230,000 USD) to September 30, 2021. Pursuant to the option agreement, the Company is required to pay a $50,000 USD option payment each June in 20212027 and is required to incur an aggregate amount of $1,000,000 USD in exploration expenditures by June 2022. As of September 30, 2021, the Company has fulfilled this exploration expenditure commitment.

During the year ended December 31, 2019, the Company received a notice from a junior mining company that seven of the claims on Tibbs wholly or partially overstake their claims, and they are asserting the senior claim. Tectonic considers the disputed claims to be non-core, and this notice will not impact Tectonic’s exploration efforts going forward on the rest of the Company’s Tibbs claims.

CARRIE CREEK & MT. HARPER

In August 2020, the Company entered into a mining lease agreement with Doyon for a 100% interest in the area of the Alaska Native regional corporation mineral estate in the Goodpastor District, Alaska (the “Carrie Creek and Mt. Harper Properties”). The lease covers the mineral estate and the surface estate and grants the Company rights to conduct mineral exploration and, if warranted, mineral development and production activities. Doyon is granted a 2% NSR for precious minerals and a 1% NSR for base minerals until the end of the fourth year of commercial production. Doyon is granted a 3% NSR for precious minerals and a 2% NSR for base minerals from the fifth to tenth anniversary of commercial production. After the tenth anniversary of commercial production, the production royalty for precious minerals is the greater of a 4% NSR or 15% of net proceeds and the production royalty for base minerals is the greater of a 3% NSR or 15% of net proceeds. The initial lease term is for fifteen years, and the lease agreement includes renewal clauses to extend the lease period up to the entire operating operation period of a mine.

In consideration, the Company paid Doyon $13,405 ($10,000 USD) to December 31, 2020 and $12,732 ($10,000 USD) to September 30, 2021 and pursuant to the lease agreement is required to pay:

• I. $10,000 USD each January 2022-2024;

• II. $40,000 USD each January 2025–2029;

• III. $100,000 USD each January 2030 and thereafter. If the Company exercises an option to extend the lease term by another five years after completion of a feasibility study, this annual payment shall be increased to $200,000 USD; and

• IV. $150,000 USD upon completion of a feasibility study.

14

Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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Pursuant to the lease agreement, the Company is required to incur the following amounts for exploration expenditures on the Carrie Creek and Mt. Harper Properties:

Calendar Years	Required aggregate exploration expenditures over period (USD$)1
2020-2022 (not yet met)	1,000,000
2023-2026	1,200,000
2027-2030	2,000,000
Each four-lease year period commencing 2031	2,000,000

1. Eligible expenditures include all actual, direct costs, expenses, and charges related to exploration and development conducted on or for the benefit of the Carrie Creek and Mt. Harper Properties, including without limitation costs and expenses off the property and reasonably allocated to operations on the property. The Company is permitted to carry forward excess expenditures and apply them against a future year. Tectonic is required to spend at least 25% of its required aggregate expenditures for each expenditure period for the benefit of each the Carrie Creek Property and Mt. Harper Property.

Additionally, the Company contributes to the Doyon Foundation, an annual $10,000 USD scholarship for the term of the lease. The scholarship amount increases to $50,000 USD each year following the commencement of commercial production at either the Carrie Creek or Mt. Harper Property. The Company paid Doyon $13,404 ($10,000 USD) for a scholarship payment during the year ended December 31, 2020.

FLAT

In September 2021, the Company entered into a mining lease agreement with Doyon for a 100% interest in the Flat Gold Project (“Flat”) located in the in the Kuskokwim Mineral Belt, Alaska. The initial term of the lease is for 15 years and includes renewal clauses to extend the lease period up to the entire operational period of the mine. Doyon is granted a 2% NSR for precious minerals and a 1% NSR for base minerals until the fifth anniversary of commencement of commercial production. Doyon is granted a 3% NSR for precious minerals and a 2% NSR for base minerals from the fifth to tenth anniversary of commercial production. After the tenth anniversary of the commencement of commercial production, the production royalty for precious minerals is the greater of a 4% NSR or 15% of net proceeds and the production royalty for base minerals is the greater of a 3% NSR or 15% of net proceeds.

In consideration, the Company paid Doyon $37,059 ($30,000 USD) on execution of the lease and is required to make the following payments:

• I. $40,000 USD each September 2022 - 2025;

• II. $50,000 USD each September 2026 - 2030;

• III. $100,000 USD each September thereafter. If the Company exercises its option to extend the lease term, this annual payment shall be increased to $200,000 USD; and

• IV. $150,000 USD upon completion of a feasibility study.

Pursuant to the option agreement, the Company is required to incur the following amounts for exploration expenditures on the Flat Property:

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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Calendar Years	Amount of exploration expenditures (USD$)
2021 – 2023 (including no less than $500,000 by the end of 2022)	1,000,000
2024 - 2026	2,000,000
2027 – 2029	2,500,000
Each three – lease year period commencing 2030	2,500,000

1. Eligible expenditures include all actual, direct costs, expenses, and charges related to exploration and development conducted on or for the benefit of the Flat Property, including without limitation costs and expenses off the property and reasonably allocated to operations on the property. The Company is permitted to carry forward excess expenditures and apply them against a future year.

The Company has committed to contributing to the Doyon Foundation an annual $10,000 USD scholarship for the term of the lease. The scholarship amount increases to $50,000 USD each year following the commencement of commercial production at Flat. The Company paid Doyon $12,353 ($10,000 USD) for a scholarship payment during the nine months ended September 30, 2021

MAPLE LEAF

The Company staked certain claims in the State of Alaska located near the Tibbs Property (the “Maple Leaf Property”).

DATASET ACQUISITION

On June 25, 2020, the Company issued 300,000 common shares valued at $73,500 to Rubicon Minerals (“Rubicon”) in exchange for a geological, geophysical and geochemical dataset from exploration work conducted at multiple prospects including the Tibbs and Maple Leaf Properties.

07 SHARE CAPITAL AND RESERVES

Authorized Share Capital

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

Issued Share Capital

2021 TRANSACTIONS

• a) On June 23, 2021, the Company issued 71,760,560 units at a price of $0.10 per unit for gross proceeds of $7,176,056. Each unit is comprised of one common share and half a warrant. Each full warrant is convertible into one common share at an exercise price of $0.17 and expires June 23, 2023. The value attributable to the warrants was $1,552,572. The company paid finders fees $277,958 and issued 2,488,588 brokers warrants valued at $192,378 Each Finders Warrant is exercisable at a price of $0.17 and expires June 23, 2023.

2020 TRANSACTIONS

• a) On April 17, 2020, the Company issued 10,473,000 units at a price of $0.20 per unit for gross proceeds of $2,094,600 to Doyon (the “Doyon Private Placement”). Each unit comprised of one common share and half a warrant. Each full warrant is convertible into one common share at an exercise price of $0.40 and expires April 17, 2022 (“Doyon Warrants”). The value attributed to the warrants was $243,410.

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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• b) On June 25, 2020, the Company issued 300,000 common shares at a price of $0.245 per common share for an aggregate issuance price of $73,500 to Rubicon in exchange for a geological dataset from exploration work conducted at multiple prospects including the Tibbs and Maple Leaf Properties (Note 6).

• c) On June 30, 2020, the Company issued 24,615,500 units at a price of $0.20 per unit for gross proceeds of $4,923,100 (the “Non-Brokered Private Placement”). Each unit comprised of one common share and half a warrant. Each full warrant is convertible into one common share at an exercise price of $0.40 and expires June 30, 2022 (“Non-Broker Warrants”). The value attributable to the warrants was $792,627. The Non-Broker Warrants are subject to the Acceleration Clause. The Company paid finders’ fees of $194,826 and issued 956,130 brokers warrants valued at $150,972. Each broker at a price of $0.20 and expires June 30, 2022.

Doyon Private Placement

Doyon has agreed not to exercise any Doyon Warrants if as a result of such exercise it causes Doyon to hold greater than 19.99% of the total outstanding common shares of Tectonic, unless and until the shareholders of Tectonic have passed a resolution approving such exercise of the Doyon Warrants in accordance with the applicable rules and policies of the TSXV.

The Doyon Warrants are subject to an acceleration clause whereby if the volume-weighted average trading price of Tectonic’s common shares on the TSXV is $0.56 or greater for a period of 10 consecutive trading days, Tectonic has the right to accelerate the expiry day of the Doyon Warrants to 30 days from the date of issuance of a news release by Tectonic announcing the accelerated exercise period (the “Acceleration Clause”).

Doyon was granted a pre-emptive right to maintain its pro-rata interest for as long as Doyon owns more than 10% of the common shares of Tectonic, calculated on a partially diluted basis. As of September 30, 2021, Doyon owns approximately 16.5% of the common shares of Tectonic on a partially diluted basis.

Share Purchase Warrants

The value of the warrants issued during the period were determined using the BSM with the following assumptions:

2021 TRANSACTIONS

	Fair Value	Grant Date		Expected	Risk-Free	Expected Life
	Attributed $	Share Price $	Exercise Price $	Volatility	Interest Rate	(years)
Non-Broker Warrants	35,880,280	0.14	0.17	116%	0.42%	2
Finders Warrants	2,488,588	0.14	0.17	116%	0.42%	2

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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2020 TRANSACTIONS

	Fair Value	Grant Date		Expected	Risk-Free	Expected Life
	Attributed $	Share Price $	Exercise Price $	Volatility	Interest Rate	(years)
Doyon Warrants	243,410	0.17	0.40	90%	0.35%	2
Non-Broker Warrants	792,627	0.28	0.40	90%	0.26%	2
Finders Warrants	150,972	0.28	0.20	90%	0.26%	2

A summary of the Company’s warrants and the changes during the period are as follows:

			Weighted-
			average
		Shares to be issued upon	exercise
	Number of warrants	exercise of the warrants	price ($)
Balance — December 31, 2019	21,257,330	21,257,330	0.44
Doyon Warrants issued	5,236,500	5,236,500	0.40
Non-Broker Warrants issued	12,307,750	12,307,750	0.40
Finders Warrants issued	956,130	956,130	0.20
Balance — December 31, 2020	39,757,710	39,757,710	0.42
Non-Broker Warrants issued	35,880,280	35,880,280	0.17
Finders Warrants issued	2,488,588	2,488,588	0.17
Expired	(17,157,330)	(17,157,330)	0.50
Balance — September 30, 2021	60,969,248	60,969,248	0.24

Warrants outstanding as at September 30, 2021 are as follows:

Expiry date	Number outstanding	Exercise price per share ($)
April 17, 2022	5,236,5001	0.40
June 16, 2022	720,000	0.10
June 16, 2022	3,380,000	0.25
June 30, 2022	12,307,7501	0.40
June 30, 2022	956,130	0.20
June 23, 2023	35,880,2801	0.17
June 23, 2023	2,488,588	0.17
	60,969,248

1. Warrants are subject to the Acceleration Clause

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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Stock Options

The Company has a stock option plan (the “Stock Option Plan”). The Company may grant share options to eligible employees, officers, directors and consultants at an exercise price, expiry date, and vesting conditions to be determined by the Company’s board of directors. The maximum expiry date is ten years from the grant date. The Stock Option Plan permits the issuance of stock options, which, together with the Restricted Share Plan, may not exceed 10% of the Company’s issued common shares as at the date of grant.

A summary of the Company’s options and the changes during the period are as follows:

			Weighted-
			average
		Shares to be issued upon	exercise
	Number of options	exercise of the options	price ($)
Balance — December 31, 2019	-	-	$ -
Issued	400,000	400,000	0.33
Balance — December 31, 2020	400,000	400,000	0.33
Issued	1,050,000	1,050,000	0.18
Cancelled	(400,000)	(400,000)	0.18
Balance — September 30, 2021	1,050,000	1,050,000	$ 0.24

Expiry date	Number outstanding	Exercise price per share ($)
July 27, 2025	400,000	$ 0.33
August 4, 2026	400,000	$ 0.20
April 30, 2031	250,000	$ 0.16
Outstanding	1,050,000	$ 0.24
Exercisable	100,000	$ 0.33

On July 27, 2020, the Company granted 400,000 stock options to an employee. Each stock option has an exercise price of $0.33 and vest over a three-year period as follows: 100,000 stock options will vest July 27, 2021, 100,000 stock options will vest July 27, 2022, and 200,000 stock options will vest July 27, 2023. The stock options expire July 27, 2025.

On April 7, 2021, the Company granted 400,000 stock options to a former CFO. These options were cancelled unvested during the same period.

On April 30, 2021, the Company granted 250,000 stock options to consultants. Each stock option has an exercise price of $0.155 and vest over a two-year period as follows: 125,000 stock options will vest April 30, 2022 and 125,000 stock options will vest April 30, 2023. The stock options expire April 30, 2031.

On August 4, 2021, the Company granted 400,000 stock options to an employee. Each stock option has an exercise price of $0.20 and vest over a 4 year period as follows: 100,000 stock options will vest on August 4, 2022 and an additional 100,000 stock options will vest on the three subsequent anniversary dates thereafter. The stock options expire August 4, 2026.

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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The fair values of stock options are estimated using the BSM with the following weighted average assumptions:

	September 30, 2021	December 31, 2020
Risk-free interest rate	1.38%	0.42%
Expected dividend yield	0%	0%
Expected stock price volatility	117%	106%
Expected life in years	8.65	3.49

Fair value of the options on the date of grant was $72,736 (2020 - $80,786).

The Company incurred share-based compensation related to options granted as follows:

		3 months ended		3 months ended		9 months ended		9 months ended
	September. 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Marketing expense	$	4,454	$	8,759	$	29,138	$	8,759
Share based payment		8,485		-		12,885		-
Total share-based compensation	$	12,939	$	8,759	$	42,023	$	8,759

Restricted Shares

The Company has a restricted share plan (the “Restricted Share Plan”). The Company may grant common shares to eligible employees, officers, directors and consultants with performance conditions to be determined by the Company’ board of directors (a “Restricted Share”). No cash consideration is received for Restricted Shares. Performance restrictions are placed on the Restricted Shares as determined by the Board. If employees fail to meet the restrictions, the Restricted Shares are subsequently cancelled and returned to the Company’s treasury. The Restricted Share Plan permits the issuance of restricted shares, which, together with the Stock Option Plan, may not exceed 10% of the Company’ issued common shares as at the date of grant.

At the date of issuance, no value is recorded in Share Capital. Based on the share price at the date of issuance, the Company records share-based compensation as the shares vest with an offsetting amount recorded to Reserves. Upon completing of the vesting restriction, the amount in Reserves will be transferred to Share Capital.

On July 29, 2019, the Company granted 2,400,000 Restricted Shares, and on September 17, 2019, the Company granted 950,000 Restricted Shares. Both grants were to certain employees and directors at a value of $0.35 per Restricted Share. The condition set by the Board was a two-year employment period from the date of grant. During the year December 31, 2020, 675,000 Restricted Shares were forfeited and the shares were cancelled.

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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The Company incurred total share-based compensation related to restricted shares as follows:

		3 months ended		3 months ended	9 months ended		9 months ended
	September 30, 2021		September 30, 2020		September 30, 2021	September 30, 2020
Administration expense	$	49,103	$	96,011	$ 219,035	$	288,033
Exploration expense (Note 6)		4,367		25,683	30,574		77,049
Total share-based compensation	$	53,470	$	121,694	$ 249,609	$	365,082

Escrow

The Company entered into an escrow agreement pursuant to which 19,272,071 common shares and 4,275,642 warrants have been placed in escrow. The escrow agreement provides that 10% of the escrowed securities will be released upon the Company’s listing date and that an additional 15% will be released every six months after, over a period of 36 months. As of September 30, 2021, there were 8,672,433 (December 31, 2020 – 11,563,243) common shares and 1,924,041 (December 31, 2020 – 2,565,387) warrants held in escrow.

Base Shelf Prospectus

On May 29, 2020, the Company filed a short form base shelf prospectus (the “Prospectus”). The Prospectus allows the Company to offer up to $100 million of common shares, warrants, subscription receipts, debt securities, share purchase contracts and units from time to time until June 29, 2022.

08 RELATED PARTY TRANSACTIONS

The Company defines key management personnel as its directors and officers. The Company entered into the following transactions with its key management:

	3 months ended		3 months ended	9 months ended		9 months ended
	September 30,		September 30,	September 30,		September 30,
	2021		2020	2021		2020
Employee salaries – administration expense	$ 80,020	$	97,500	$ 389,292	$	300,694
Employee salaries– exploration expense	87,500		37,500	162,500		116,597
Share based compensation – restricted shares	53,470		109,138	249,609		325,816

• During the nine months ended September 30, 2021, the Company paid $25,721 (2020 - $nil) to a consulting firm that provides financial consulting, accounting, and CFO services. The CFO is an employee of the consulting firm and is not paid directly by the Company.

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Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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09 LEASE OBLIGATION

During the nine months ended September 30, 2021, the Company renewed an office lease agreement to pay rent as follows:

Calendar Years		Rental Payment
2021	$	7,594
2022		30,376
2023		10,126
Total	$	48,096

		Lease liability
Balance — December 31, 2020	$	62,601
Lease payments during the period		(22,391)
Interest expense on lease liability		4,101
Balance — September 30, 2021		44,311
Current	$	27,168
Long-Term		17,143
Total — September 30, 2021	$	44,311

10 SUPPLEMENTAL CASH FLOW INFORMATION

	9 months ended	9 months ended
	September 30,	September 30,
	2021	2020
Non-cash financing and investing activities:
Right to use asset and lease liability	-	77,337
Shares issued for exploration & evaluation asset dataset	-	73,500
Finder Warrants issued for financing fees	192,378	150,972
Trade and other payables used for share issue costs	-	18,354
Special Warrants issued for share issue costs	-	25,000
Assets acquired included in accounts payable	37,059	-

11 SEGMENTED INFORMATION

The Company’s reportable operating segments, which are components of the Company’s business where separate financial information is available and which are evaluated on a regular basis by the Company’s Chief Executive Officer, who is the Company’s chief operating decision maker, for the purpose of assessing performance. The Company’s operating segments are its exploration and evaluation assets and expenditures which are disclosed by geographic location in Note 6. All corporate expenses are incurred in Canada.

22

Notes to Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars - unaudited) September 30, 2021

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12 CAPITAL MANAGEMENT

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

The properties in which the Company currently has an interest are in the exploration stage and are not positive cash-flow generating; as such, the Company has historically relied on the equity markets to fund its activities.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The Company is not subject to externally imposed capital restrictions.

There has been no significant change in the Company’s objectives, policies, and processes for managing its capital during the nine months ended September 30, 2021.

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