GTOR GGToor Inc (CE)

Notes to Interim Consolidated Financial Statements

Six Months Ended September 30, 2017 and 2016

(Unaudited - Expressed in US dollars)

1.     Nature of Operations and Going Concern

Gold Torrent, Inc. (the “Company”) was incorporated in Nevada as Celldonate Inc. on August 15, 2006. Historically we were in the business of developing mobile monetization solutions and applications. On September 10, 2013, certain shareholders, including the Company’s current Chief Executive Officer and its President, acquired approximately 53% of the Company’s issued and outstanding common stock resulting in a change of control. In connection with the transaction, Daniel Kunz was appointed Executive Chairman and Ryan Hart was appointed Chief Executive Officer and President. Thereafter, the Company began to focus on acquiring ownership in late-stage exploration to development stage gold mining projects and/or royalty or streaming interests in low capital intensity, late-stage mining projects in North America. During the fiscal year ended March 31, 2015, the Company entered into an Exploration and Option to Enter Joint Venture Agreement with a third party (Note 4).

The Company has incurred losses since inception and has an accumulated deficit of $7,645,135 (March 31, 2017 - $3,987,428) as of September 30, 2017. As at September 30, 2017, the Company has working capital of $3,684,152 (March 31, 2017 - $906,324).

These factors raise some doubt about the ability of the Company to continue as a going concern. The Company’s continuance as a going concern is dependent on the success of the efforts of its directors and principal stockholders in providing financial support in the short-term, and achieving profitable operations. In the event that such resources are not secured, the assets may not be realized or liabilities discharged at their carrying amounts, and the difference from the carrying amounts reported in these consolidated financial statements could be material.

These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of the assets or the amounts and classifications of the liabilities that may result from the inability of the Company to continue as a going concern.

2.     Significant Accounting Policies

These unaudited interim financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The Company’s functional and reporting currency is the US dollar.

These unaudited consolidated interim financial statements include the accounts of the Company and the accounts of the Company’s 70% owned subsidiary, Alaska Gold Torrent, LLC, incorporated in the State of Alaska. For all periods presented, all significant inter-company accounts and transactions have been eliminated in the consolidated financial statements.

The results of operations for the consolidated interim period presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending March 31, 2018. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted. These unaudited consolidated interim financial statements and notes included herein have been prepared on a basis consistent with, and should be read in conjunction with, the Company’s audited financial statements and notes for the year ended March 31, 2017, as filed in its Form 10-K.

The preparation of interim consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to accounts payable and accrued liabilities, the fair value of warrants attached to common shares issued, the fair value of shares issued for services, the fair value of stock options granted, and the recoverability of income tax assets.

GOLD TORRENT, INC.

Notes to Interim Consolidated Financial Statements

Six Months Ended September 30, 2017 and 2016

(Unaudited - Expressed in US dollars)

While management believes the estimates used are reasonable, actual results could differ from those estimates and could impact future results of operations and cash flows.

Basic earnings (loss) per share is computed using the weighted average number of common shares outstanding. Diluted earnings (loss) per share assumes the exercise of common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive.

Transactions in currencies other than the US dollar are translated into US dollars at the exchange rate in effect at the balance sheet date for monetary assets and liabilities, and at historical exchange rates for non-monetary assets and liabilities. Expenses are translated at the average rates for the period, except amortization, which is translated on the same basis as the related assets. Resulting translation gains or losses are reflected in net income/loss.

All financial instruments are classified as one of the following: held-to-maturity, loans and receivables, held-for-trading, available-for-sale or other financial liabilities. Financial assets and liabilities held-for-trading are measured at fair value with gains and losses recognized in net income. Financial assets held-to-maturity, loans and receivables, and other financial liabilities are measured at amortized cost using the effective interest method. Available-for-sale instruments are measured at fair value with unrealized gains and losses recognized in other comprehensive income and reported in stockholders’ equity.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company prioritizes the inputs into three levels that may be used to measure fair value:

Transaction costs that are directly attributable to the acquisition or issue of financial instruments that are classified as held-to-maturity, loans and receivables or other financial liabilities are included in the initial carrying value of such instruments and amortized using the effective interest method. Transaction costs classified as held-for-trading are expensed when incurred, while those classified as available-for-sale are included in the initial carrying value.

GOLD TORRENT, INC.

Notes to Interim Consolidated Financial Statements

Six Months Ended September 30, 2017 and 2016

(Unaudited - Expressed in US dollars)

The Company uses the asset and liability approach in its method of accounting for income taxes that requires the recognition of deferred tax liabilities and assets for expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The Company recognizes the effect of uncertain tax positions where it is more likely than not based on technical merits that the position could be sustained where the tax benefit has a greater than 50% likelihood of being realized upon settlement. A valuation allowance against deferred tax assets is recorded if based upon available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company records all share-based payments at fair value. Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted at the grant date. The grant date fair value is recognized through profit or loss over the vesting period, described as the period during which all the vesting conditions are to be satisfied.

Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received. When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model.

At each balance sheet date, the amount recognized as an expense is adjusted to reflect the actual number of stock options expected to vest. On the exercise of stock options, common stock is recorded for the consideration received and for the fair value amounts previously recorded to contributed surplus. The Company uses the Black-Scholes option pricing model to estimate the fair value of share-based payments.

The Company is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred. When the Company has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

The Company assesses the carrying costs for impairment under ASC 360, Property, Plant, and Equipment at each fiscal year end. An impairment loss is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value.

Property, plant and equipment are carried at cost less accumulated amortization and impairment losses, if any. Amortization is provided at rates and methods designed to write off cost of the assets over their estimated useful lives as follows:

Management reviews the amortization method, useful lives and residual values annually and accounts for any changes in estimates on a prospective basis.

GOLD TORRENT, INC.

Notes to Interim Consolidated Financial Statements

Six Months Ended September 30, 2017 and 2016

(Unaudited - Expressed in US dollars)

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

The Company has designated its cash as held-for-trading; advances receivable as loans and receivables; and accounts payable, accrued liabilities, and payroll liabilities as other financial liabilities.

The fair values of the Company’s cash, advances receivable, accounts payable, accrued liabilities, and payroll liabilities approximate their carrying values due to the short-term maturity of these instruments.

Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company is not exposed to significant credit risk as at September 30, 2017.

The Company’s functional currency is the US dollar. The Company translates transactions in foreign currencies into US currency using rates on the date of the transactions. Translation risk is considered minimal, as the Company does not incur any significant transactions in currencies other than US dollars.

The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary current assets and liabilities.

Liquidity risk is the risk that the Company will encounter difficulty in satisfying its financial obligations as they become due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. At September 30, 2017, the Company had accounts payable of $644,063 (March 31, 2017 - $356,274), which are due within 30 days or less. At September 30, 2017, accrued liabilities consist of accrued accounting and legal fees of $10,000 (March 31, 2017 - $15,000), accrued interest of $125,479 (March 31, 2017 - $25,205), accrued executive compensation of $408,107 (March 31, 2017 - $407,607), and exploration and development costs of $Nil (March 31, 2017 - $27,761).

On August 28, 2017, Gold Torrent, Inc. (the “Registrant”), and its subsidiary Alaska Gold Torrent, LLC, entered into a Mining Services Agreement (the “Agreement”) with Mining & Environmental Services, LLC for development of the Registrant’s Luck Shot Mine, and other related mining services, including the development of the land located around the mine. If fully completed, it is estimated the Registrant will pay approximately $4,500,000 for such services. The Agreement contains customary representations, warranties and covenants by the parties for like transactions.

GOLD TORRENT, INC.

Notes to Interim Consolidated Financial Statements

Six Months Ended September 30, 2017 and 2016

(Unaudited - Expressed in US dollars)

4.     Exploration, Development and Mineral Properties

On July 28, 2014, the Company entered into a non-binding Letter of Intent with a third party to negotiate and enter into a Joint Venture Agreement for the development of the gold property known as Lucky Shot, Alaska (formerly known as “Willow Creek”). On November 5, 2014, the Company signed an Exploration and Option to Enter Joint Venture Agreement for the Lucky Shot project in Alaska. The Exploration and Option Agreement provides the Company with the right to earn up to 70% interest in a joint venture with Miranda USA Inc. (“Miranda”) by making certain expenditures over the next three years totaling $10,000,000. The principal terms of the Exploration and Option Agreement provide that the Company can earn an initial 20% interest in the Lucky Shot gold project by incurring an initial work commitment of $1,070,000 before May 5, 2016 in costs related to exploration and development of the project.

On January 15, 2015 and January 6, 2016, the Company paid $150,000 for a Lease Agreement between Miranda and a private company. In addition, the Company is committed to paying $150,000 every year on January 15. The purpose of this lease is to afford Miranda the opportunity to enter onto and produce minerals from certain patents and State of Alaska mining claims located in the State of Alaska. This lease is to be vended by Miranda to the joint venture upon the Company earning its initial 20% interest. On May 25, 2016, the Company received formal notice from Miranda that the Company has acquired a permanent 20% interest in the Lucky Shot project by virtue of meeting the initial earn-in required expenditures.

On July 8, 2016, the Company purchased a 30-acre parcel of private, undeveloped land for $100,506 and on March 15, 2017, purchased two buildings for $304,900 in Alaska near the Lucky Shot project for the siting of a gold recovery plant.

On February 13, 2017, the Company entered into a $11,250,000 gold and silver prepayment arrangement for the Lucky Shot gold project. The Streaming Agreement provided for a closing on the first tranche of $6,500,000 upon satisfaction by the Company of certain closing conditions.

On June 27, 2017, the Company and the Stream Investor agreed, after the satisfaction by the Company of a majority of the Tranche 1 closing conditions, to amend certain provisions of the Streaming Agreement and concurrently close on one-half of Tranche 1 in the amount of $3,250,000. The second half of the first tranche, also in the amount of $3,250,000, has been consummated on August 8, 2017 upon satisfaction of the final closing conditions.

The Company has acquired a permanent 70% interest in the Lucky Shot project by virtue of meeting the earn-in required expenditures. In addition, Miranda contributed mineral property leases valued at $4,285,714 to the Lucky Shot project.

On August 28, 2017, the Company entered into a Mining Services Agreement with Mining & Environmental Services, LLC for development of the Company’s Lucky Shot Mine, and other related mining services, including the development of the land located around the mine. If fully completed, it is estimated the Company will pay approximately $4,500,000 for such services. The Agreement contains customary representations, warranties and covenants by the parties for like transactions.

As at September 30, 2017, mineral property interest consists of:

Cumulative Funding to Alaska Gold Torrent LLC:

As at September 30, 2017, the Company has provided funding to Alaska Gold Torrent, LLC in the total amount of $9,886,925. This consists of cumulative acquisition, exploration, engineering costs and capital contributions of $2,886,925 as at March 31, 2017, and $7,000,000 in additional funding during the three months ended September 30, 2017:

GOLD TORRENT, INC.

Notes to Interim Consolidated Financial Statements

Six Months Ended September 30, 2017 and 2016

(Unaudited - Expressed in US dollars)

5.    Property, Plant and Equipment  

Accounts payable as at September 30, 2017 includes the following:

On February 13, 2017, the Company entered into a convertible preferred note and investment agreement with two Singapore private limited companies for a $2,000,000 convertible preferred note and a $11,250,000 gold and silver prepayment arrangement for the Company’s Lucky Shot gold project. The Company paid $100,000 in legal expenses and used the proceeds from the note as part of the Company’s initial investment in the project.

The convertible preferred note bears interest at 10% per annum, is due on February 13, 2019 and secured by certain assets of the Company. It is also convertible into 15% of the shares of common stock of the Company on a post-money basis on the earlier of: (i) a Canadian Going Public Transaction or (ii) funding of the $11,250,000 prepayment arrangement and following an equity raise by the Company of $5,000,000 or more (of which $2,000,000 will include the conversion of the preferred note).

Concurrent with the closing and funding of the convertible preferred note, the Company and Miranda, a wholly-owned subsidiary of Miranda Gold Corp. of Canada, executed a joint venture operating agreement and formed Alaska Gold Torrent, LLC, an Alaska limited liability company under which the Company now owns a seventy percent (70%) undivided interest in the project.

On August 8, 2017, the Company received the second payment of $3,250,000 for a total of $6,500,000 as per the Streaming Agreement (Note 4).

Transactions with related parties for goods and services are based on the exchange amount as agreed to by the related parties.

Details of related party transactions are as follows:

GOLD TORRENT, INC.

Notes to Interim Consolidated Financial Statements

Six Months Ended September 30, 2017 and 2016

(Unaudited - Expressed in US dollars)

The Company operates primarily in one business segment being the identification and development of mining projects with substantially all of its assets and operations located in the United States.

During the year ended March 31, 2017, the Company entered into subscription agreements for the issuance of 2,040,000 shares of common stock at a purchase price of $0.25 per share for a total amount of $510,000 in cash, and 1,890,000 shares of common stock at a purchase price of $0.50 per share for a total amount of $945,000 in cash.

During the period ended September 30, 2017, the Company entered into subscription agreements for the issuance of 3,450,000 bonus shares of common stock as compensation to its current CEO, Chairman, management and technical team for $0.50 per share.

The Company also issued 1,569,950 shares of common stock for $784,975 in cash in the period ended September 30, 2017.

The stock options have been granted in conjunction with an Equity Incentive Plan (the “Plan”) for employees, directors and consultants, whereby a maximum aggregate number of common shares that may be issued under the Plan are 20,000,000 common shares. The term of the options is determined by the Board of Directors and cannot exceed 10 years. The exercise price of the stock options is determined by the Board of Directors, but shall not be less than the fair market value of the common stock on the date of grant. Stock options granted under the Plan vest over varying periods at the discretion of the Board of Directors.

The following table summarizes historical information about the Company’s incentive stock options:

The Company’s stock options are outstanding and exercisable as follows:

During the fiscal year ended March 31, 2017, the Company did not grant any stock options.

GOLD TORRENT, INC.

Notes to Interim Consolidated Financial Statements

Six Months Ended September 30, 2017 and 2016

(Unaudited - Expressed in US dollars)

In April 2017, the Board approved a new grant of up to 3,000,000 exercisable at $0.50 per share options to the directors, officers, employees, and advisors; the total amount of options granted was 2,175,000 exercisable at $0.50 per share under the terms of the 2016 Stock Option and Bonus Plan.

On October 19, 2017, Gold Torrent, Inc. (the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Gold Torrent (Canada) Inc., a wholly-owned subsidiary of the Company organized under the laws of the Province of British Columbia, Canada (“Gold Torrent Canada”) and GTOR US Merger Co, a Nevada corporation and wholly-owned subsidiary of Gold Torrent Canada (“US Merger Co”). Pursuant to the terms of the Merger Agreement, the parties would effect a merger transaction that will effectively change the jurisdiction of incorporation of the corporate parent from Nevada to British Columbia, Canada (the “Redomicile Transaction”).

Pursuant to the terms of the Merger Agreement, US Merger Co. will be merged with and into the Company, with the Company continuing as the surviving corporation, and each share of Company common stock outstanding immediately prior to the effective time of the Redomicile Transaction will be cancelled and converted into the right to receive one common share of Gold Torrent Canada. At the effective time of the Redomicile Transaction and pursuant to the terms of the Merger Agreement, all outstanding options to purchase shares of the Company’s common stock, all outstanding shares of restricted stock, and all other equity-based awards granted to employees and directors of the Company or any of its subsidiaries under the Company’s equity incentive plans prior to the effective time of the Redomicile Transaction will entitle the holder to purchase or receive, or receive benefits or amounts based on, as applicable, an equal number of common shares in Gold Torrent Canada. All such equity-based awards will generally be subject to the same terms and conditions as were applicable to such awards immediately prior to the effective time of the Redomicile Transaction.

The consummation of the Redomicile Transaction will be conditioned on (1) the affirmative vote of a majority of the outstanding shares of the Company’s common stock entitled to vote on the adoption of the Merger Agreement, (2) the Securities and Exchange Commission (the “SEC”) declaring effective a registration statement registering the distribution of common shares of Gold Torrent Canada in the Redomicile Transaction filed by Gold Torrent Canada on Form S-4 under the Securities Act of 1933, as amended, and (4) other customary conditions.

The Company evaluates events that have occurred after the balance sheet date, but before the financial statements are issued. Based upon the evaluation, other than what is described above, the Company did not identify any recognized or non-recognized subsequent events that would have required further adjustments or disclosures in the financial statements.

The Company concluded that the consolidated balance sheet, and related consolidated statements of operations, cash flows, and stockholders’ equity (deficiency) included in Form 10-Q Quarterly Report, dated November 14, 2017 included certain erroneously capitalized development costs that should have been expensed. In connection with this, the financial statements for the Quarterly Report as of September 30, 2017 have been restated to account for the reduction of the previously capitalized development costs and the corresponding expensing of those costs as a correction of error. Management considered the impact to the current and past financial statements and determined that a restatement was the most appropriate recognition of the adjustment so as not to mislead readers of the financial statements regarding the current quarter’s results of operations.

The following adjustments were made to the September 30, 2017 restated financial statements: