Valhalla Metals Inc. — Interim / Quarterly Report 2021

Feb 25, 2021

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UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

SOLIDUSGOLD INC.

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by management and approved by the Audit Committee and Board of Directors of the Company.

The Company’s independent auditors have not performed a review of these condensed consolidated interim financial statements in accordance with the standards established by CPA Canada for a review of interim financial statements by an entity’s auditors.

SOLIDUSGOLD INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

AS AT DECEMBER 31, 2020 AND MARCH 31, 2020

(Expressed in Canadian Dollars)

		December 31,		March 31,
		2020		2020
ASSETS		(unaudited)		(audited)
Current
Cash	$	530,345	$	18,302
Short-term investment		5,300		5,250
Amounts receivable		1,121		867
Prepaid expenses		14,254		7,591
		551,020		32,010
Explorationand evaluationassets (Note 3)		41,854		41,854
	$	592,874	$	73,864
LIABILITIES
Current
Accounts payable and accrued liabilities (Note 6)	$	263,530	$	226,217
DEFICIENCY
Share capital (Note 4)		3,681,034		3,099,598
Share-based payment reserves		271,605		271,605
Deficit		(3,623,295 )		(3,523,556)
		(329,344)		(152,353)
	$	592,874	$	73,864

CORPORATE INFORMATION AND NATURE OF CONTINUANCE OF OPERATIONS (Notes 1 and 2(c))

Approved by the Board of Directors on February 25, 2021

“Raj Chowdhry” “Rick Van Nieuwenhuyse” Raj Chowdhry, Director Rick Van Nieuwenhuyse, Director

(The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements)

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SOLIDUSGOLD INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in Canadian Dollars)

		Three months ended	Three months ended	Three months ended		Nine months ended	Nine months ended	Nine months ended
			December 31,				December 31,
		2020		2019		2020		2019
EXPENSES
Exploration and evaluation costs	$	-	$	15,584	$	-	$	54,780
Professional and consulting fees		9,134		12,507		24,941		33,335
Office, administration and miscellaneous		13,263		4,489		21,088		13,875
Management fees		15,000		15,000		45,000		45,000
Regulatory and transfer agent fees		5,059		2,842		8,305		6,671
Foreign exchange loss/(gain)		18		27		50		4
Interest and bankcharges		109		113		355		358
LOSSFROMOPERATIONS		(42,583)		(50,562)		(99,739)		(154,023)
COMPREHENSIVE LOSS FOR THE
PERIOD		(42,583)		(50,562)		(99,739)		(154,023)
BASICAND DILUTED LOSSPERSHARE	$	(0.00)	$	(0.00)	$	(0.00)	$	(0.00)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING		61,819,225		55,731,865		57,266,213		55,731,865

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(The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements)

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SOLIDUSGOLD INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in Canadian Dollars)

		2020		2019
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net loss for the period	$	(99,739)	$	(154,023)
Changes in non-cash working capital balances:
Amounts receivable		(254)		(780)
Prepaid expenses		(6,662)		(4,821)
Accounts payable and accruedliabilities		37,312		86,334
Cash used in operating activities		(69,343)		(73,290)
INVESTING ACTIVITY
Short-term investment		(50)		(50)
Cashusedin investing activity		(50)		(50)
FINANCING ACTIVITY
Private placement, net of costs		581,436		-
Cash provided by financing activity		581,436		-
CHANGE IN CASH DURING THE PERIOD		512043		(73,340)
CASH, BEGINNING OF PERIOD		18,302		96,034
CASH,END OF PERIOD	$	530,345	$	22,694
SUPPLEMENTAL CASH DISCLOSURES
Interest paid	$	-	$	-
Income taxespaid	$	-	$	-

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

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SOLIDUSGOLD INC.

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

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in Canadian Dollars)

Balances at April 1, 2019 Netloss and comprehensiveloss	CommonShares Number of Shares Amount Share-based payment reserves Deficit Total
	55,731,865 $ 3,099,678 $ 271,605 $ (3,359,692) $ 11,511 - - - (154,023) (154,023) 55,731,865 $3,099,678 $271,605 $ (3,513,715) $ (142,512)
Balances as at December 31,2019

Balances at April 1, 2020	55,731,865	$ 3,099,598	$ 271,605	$ (3,523,556)	$ (152,353)
Private placement, net of costs	6,667,109	581,436	-	-	581,436
Net loss and comprehensive loss	-	-	-	(99,739)	(99,739)
Balances as at December 31,2020	62,398,974	$3,681,034	$271,605	$ (3,623,295)	$ (329,344)

(The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements)

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SOLIDUSGOLD INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in Canadian Dollars)

1. CORPORATE INFORMATION AND NATURE OF CONTINUANCE OF OPERATIONS

SolidusGold Inc. (the “Company”) was incorporated on April 13, 2011 under the laws of British Columbia under the name of “Mantra Capital Inc.”. On September 4, 2014 the Company changed its name to SolidusGold Inc. and commenced trading on the TSX Venture Exchange (“TSX-V”) under the new symbol of “SDC”. The address of the Company’s corporate office and its principal place of business is 10[th] Floor, 595 Howe Street, Vancouver, British Columbia, V6C 2T5, Canada.

At December 31, 2020, the Company had not yet determined whether its property contains ore reserves that are economically recoverable. The recoverability of amounts shown for exploration and evaluation assets is dependent upon the discovery of economically recoverable reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete the development, and upon future profitable production or proceeds from the disposition of the resource property. The outcome of these matters cannot be predicted at this time and the uncertainties cast significant doubt upon the Company’s ability to continue as a going concern.

These interim condensed consolidated financial statements do not give effect to any adjustments which would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in these financial statements.

During March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on the Company is not currently determinable, but management continues to monitor the situation.

2. SIGNIFICANT ACCOUNTING POLICIES

a) Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), including IAS 34 – Interim Financial Reporting. For these purposes, IFRS comprise the standards issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).

The accounting policies applied in these interim condensed financial statements are consistent with those applied in the preparation of, and disclosed in, the Company’s audited annual consolidated financial statements for the year ended March 31, 2020.

b) Basis of presentation

These condensed consolidated interim financial statements include the assets and operations of the Company and its wholly owned subsidiaries, Solidus Holdings Inc. (“Solidus Holdings”) and SolidusGold US Inc. (“Solidus US”). Solidus Holdings was incorporated on October 30, 2014 under the British Columbia Business Corporations Act. Solidus US was incorporated on July 15, 2014 in Nevada, USA. All significant inter-company balances and transactions have been eliminated upon consolidation.

The condensed consolidated interim financial statements have been prepared on the historical cost basis, with the exception of financial instruments which are measured at fair value, as explained in the accounting policies set out below. In addition, these financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

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SOLIDUSGOLD INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in Canadian Dollars)

1. SIGNIFICANT ACCOUNTING POLICIES (continued)

c) Going concern

These condensed consolidated interim financial statements are prepared on a going concern basis, which assumes that the Company will continue its operations for a reasonable period of time. The Company has incurred losses since its inception and had an accumulated deficit of $3,623,295 as at December 31, 2020. Management has determined that the Company will be able to continue as a going concern for a reasonable period of time, and realize its assets and discharge its liabilities and commitments in the normal course of business.

3. EXPLORATION AND EVALUATION ASSETS

Expenditure for the nine months ended December 31, 2020 and the year ended March 31, 2020 are as follows:

		April 1,		Acquisition	December 31,	December 31,
		2020		Costs		2020
Honeymoon	$	41,854	$	-		41,854
Total	$	41,854	$	-	$	41,854
		April 1,		Acquisition		March 31,
		2019		Costs		2020
Honeymoon		41,854		-		41,854
Total	$	41,854	$	-	$	41,854

During the nine months ended December 31, 2020 and 2019, the Company did not incur any exploration costs.

Honeymoon Property

The Honeymoon Property is an early stage gold-silver-copper property located on the west side of Adams Lake, British Columbia and is comprised of 4 claim blocks for a total of 3,415 hectares.

On May 27, 2015, the Company and the Optionor mutually cancelled the previous agreement and concurrently entered into a purchase and sale agreement for an undivided 100% right, title and interest in and to the Honeymoon Property. Pursuant to the terms of the sale and purchase agreement the Company agreed to pay $3,500 (paid) and issue 70,000 common shares (issued) as consideration for the property.

The Optionor will retain a 0.5% Net Smelter Returns royalty on the property and the royalty may be purchased by the Company at any time for $1,500,000.

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SOLIDUSGOLD INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in Canadian Dollars)

4. SHARE CAPITAL

• a) Authorized:

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

• b) Issued and Outstanding as at December 31, 2020: 62,398,974 (December 31, 2019: 55,731,865) common shares.

On October 8, 2020, the Company closed a non-brokered private placement of 6,667,109 units priced at $0.09 per unit raising $600,040. Each unit consist of one common share and one common share purchase warrant. The common share purchase warrant has a purchase price of $0.12 per common share for a period of two years. The Company paid $18,604 of costs related to the financing.

Warrants

The following table summarizes the continuity of the Company’s warrants:

Exercise							December 31,
Price	April	1,	2020	Issued	Exercised		2020	Expiry Date
$0.12		-		6,667,109		-	6,667,109	October 8, 2022
		-		6,667,109		-	6,667,109

As at December 31, 2020, the Company had 6,667,109 warrants outstanding with an exercise price of $0.12 for a period of two (2) years after issuance. (December 31, 2019 – 3,571,429)

5. STOCK OPTION PLAN AND SHARE-BASED PAYMENTS

On July 8, 2011, the Company adopted an incentive stock option plan (the “Option Plan”) which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with TSX-V regulations, grant to directors, officers, employees and consultants nontransferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares at the time of the grant. Such options will be exercisable for a period of up to ten years from the date of grant. Vesting terms will be determined at the time of grant by the Board of Directors.

	Number of	Weighted average
	options	exerciseprice
Balance, April 1, 2019 and March 31, 2020	2,905,000	$ 0.06
Expired	(550,000)	0.09
Balance,December 31,2020	2,355,000	$0.06

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SOLIDUSGOLD INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in Canadian Dollars)

5. STOCK OPTION PLAN AND SHARE-BASED PAYMENTS (continued)

The following table summarizes stock options outstanding and exercisable at September 30, 2020:

		Options Outstanding		OptionsExercisable	OptionsExercisable
		Weighted	Weighted		Weighted
		Average	Average		Average
Exercise	Number	Remaining	Exercise		Exercise
Price	of	Contractual Life	Price	Number	Price
$	Shares	(years)	$	Exercisable	$
		0.97
0.025	2,000,000	1.22	0.025	2,000,000	0.025
0.25	355,000	3.62	0.25	355,000	0.25
	2,355,000	1.43	0.06	2,355,000	0.06

Stock options outstanding at December 31, 2020 will expire between December 19, 2021 and August 15, 2024.

6. RELATED PARTY BALANCES AND 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.

The Company had the following related party balances at December 31:

The Company had the following related party balances at	December 31:
Due to MA2 Capital Inc. $ Due to Sandfire America Resources Inc. Due to Chief Financial Officer Due to former Chief Executive Officer (“CEO”)	2020 2019
	180,000 $ 120,000 19,153 19,153 23,438 8,850 15,000 15,000
Total due to relatedparties $	237,591 $ 163,003

MA2 Capital Inc. is controlled by the current CEO. Sandfire America Resources Inc. was formerly related by common directors.

The amounts due to related parties were incurred in the normal course of business and have been included in accounts payable. The balances are non-interest bearing, unsecured and are due on demand.

Key management personnel receive compensation in the form of short-term employee benefits, share-based payments, and post-employment benefits. Key management personnel include the Chief Executive Officer, Chief Financial Officer, and directors of the Company. The remuneration of key management is as follows:

Management fees $ Consultingfees	2020 2019
	45,000 $ 45,000 11,625 8,681
Total remuneration $	56,625 $ 53,681

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SOLIDUSGOLD INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in Canadian Dollars)

7. MANAGEMENT OF 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 sourcing and exploration of its resource property. The Company does not have any externally imposed capital requirements to which it is subject.

The Company considers the aggregate of its equity as capital. As at December 31, 2020, the Company had capital resources consisting of cash. 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 or dispose of assets or adjust the amount of cash.

The Company’s investment policy is to invest its cash and cash equivalents in investment instruments in high credit quality financial institutions with terms to maturity selected with regards to the expected time of expenditures from continuing operations.

8. FINANCIAL INSTRUMENTS AND FINANCIAL RISK

Financial Instruments and Fair Value Measurements

IFRS 13 – Fair Value Measurement , establishes a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Assets measured at fair value on a recurring basis were presented on the Company’s statements of financial position are as follows:

			Fair ValueMeasurements Using	Fair ValueMeasurements Using	Fair ValueMeasurements Using	Fair ValueMeasurements Using
		Quoted Prices in		Significant
		Active Markets		Other		Significant
		For Identical		Observable		Unobservable
		Instruments		Inputs		Inputs
		(Level 1)		(Level 2)		(Level 3)		Total
December 31, 2020:
Cash	$	530,345	$	–	$	–	$	530,345
Short-term investment		5,300		–		–		5,300
March 31, 2020:
Cash	$	18,302	$	–	$	–	$	18,302
Short-term investment		5,250		–		–		5,250

Financial risk management objectives and policies

The Company’s risk associated with its financial instruments and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

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SOLIDUSGOLD INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in Canadian Dollars)

8. FINANCIAL INSTRUMENTS AND FINANCIAL RISK (continued)

Financial risk management objectives and policies (continued)

(i) Currency risk

The Company has operations in the United States which are transacted into U.S. dollars. Accordingly, the Company is exposed to foreign exchange risk with respect to these transactions. The Company has not undertaken hedging activities to mitigate this risk.

The Company does not have any significant foreign currency denominated monetary liabilities.

(ii) Interest rate risk

The Company is exposed to interest rate risk on the variable rate of interest earned on bank deposits. The fair value interest rate risk on bank deposits is insignificant as the deposits are short ‐ term.

The Company has not entered into any derivative instruments to manage interest rate fluctuations.

( iii) Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.

(iv) Liquidity risk

In the management of liquidity risk of the Company, the Company maintains a balance between continuity of funding and the flexibility through the use of borrowings. Management closely monitors the liquidity position and expects to have adequate sources of funding to finance the Company’s projects and operations. As at December 31, 2020, the Company had working capital surplus of $287,490. As at December 31, 2020, the Company had cash and short-term investment of $535,645 to settle accounts payable of $263,530 which fall due for payment within twelve months of the financial position date.

9. BASIC AND DILUTED LOSS PER SHARE

The calculation of basic and diluted loss per share for the periods ended December 31, 2020 and 2019 was based on the loss attributable to common shareholders of $99,739 (2019 – $154,023) and the weighted average number of common shares outstanding of 57,266,213 (2019 – 55,731,865). Stock options of 2,905,000 outstanding at December 31, 2020 were not included in the diluted loss per share calculation as the effect is anti-dilutive.

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