Fathom Nickel Inc. — Interim / Quarterly Report 2021

Nov 30, 2021

FATHOM NICKEL INC.

UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Expressed in Canadian Dollars, unless otherwise stated)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020

FATHOM NICKEL INC. CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT (Unaudited)

Note ASSETS Current assets Cash and cash equivalents 6 Goods and services tax receivable 7 Deposits and prepaids Interest receivable Non-current assets Exploration and evaluations asset 5 Propertyand equipment Total assets EQUITY AND LIABILITIES Current liabilities Accounts payable and accrued liabilities Flow-through premium liability 8 Due to directors 10 Total liabilities Equity Share capital 8 Contributed surplus Deficit Total equity and liabilities Commitments and contingencies 11 Events after the reporting period 12 Approved on behalf of the Board on November 29, 2021: "Signed" Mark Cummings, Director	Note	September 30, December 31, 2021 2020
		$ 7,171,161 $ 9,270 217,305 20,113 199,219 5,000 2,261 -
		7,589,946 34,383
	Non-current assets Exploration and evaluations asset 5 Propertyand equipment	$ 4,495,602 $ 1,483,587 5,616 -
		4,501,218 1,483,587
	Total assets	$ 12,091,164 $ 1,517,970
		$ 1,110,170 $ 35,713 625,863 - - 1,991
		1,736,033 37,704
	Total liabilities	1,736,033 37,704
	Equity Share capital 8 Contributed surplus Deficit	$ 14,668,710 $ 1,994,392 971,040 94,200 (5,284,619) (608,326)
		10,355,131 1,480,266
	Total equity and liabilities	$ 12,091,164 $ 1,517,970
	Commitments and contingencies 11 Events after the reporting period 12 Approved on behalf of the Board on November 29, 2021: "Signed" Mark Cummings, Director	"Signed" John Morgan, Director

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

FATHOM NICKEL INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE PERIODS ENDED SEPTEMBER 30, 2021 and 2020 (unaudited)

(unaudited)
			Three Months	Ended Sept	30		Nine Months	Ended	Sept 30
	Note		2021	2020			2021		2020
Expenses
Finance expense	4	$	-	$	-	$	2,672,145	$	-
Share based compensation	8		141,500		-		662,500		-
Legal and accounting			34,425		-		271,766		602
Advertising and promotion			118,837		-		128,801		-
Administrative consulting	10		67,696		-		169,086		-
External consultants			73,000		-		559,129		-
Commission, exchange and communication			39,868		-		121,072		-
Insurance			27,641		-		45,966		-
Web and internet			-		-		6,749		-
Travel and entertainment			34,168		-		44,405		6,807
Dues and subscriptions			-		-		1,500		2,127
Office			3,189		-		4,914		880
Bank charges			1,244		34		2,353		92
Operating loss			541,568		34		4,690,386		10,508
Gain on sale of marketable securities			-		-		-		(2,882)
Interest income			(7,466)		-		(14,093)		-
Net loss and comprehensive loss	9		534,102		34		4,676,293		7,626
Net lossper share	9	$	0.01	$	0.00	$	0.11	$	0.00
Weighted average outstanding shares			45,311,393	12,026,287			42,524,428		12,005,944

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

FATHOM NICKEL INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE PERIODS ENDED SEPTEMBER 30, 2021 and 2020 (Unaudited)

Note	Common Shares Special Warrants Amount Contributed surplus Deficit Total Share Capital
Balance, December 31, 2019 Share issue for services, net of share issuance costs 8 Loss and comprehensive loss	11,332,080 - $ 1,751,716 $ 94,200 $ (577,092) $ 1,268,824 694,207 - 162,911 - - 162,911 - - - - (7,626) (7,626)
Balance,September 30,2020	12,026,287 -$ 1,914,627 $ 94,200 $ (584,718) $ 1,424,109
Equity component of the convertible debenture Share issue on debenture conversion 8 Loss and comprehensive loss	- - - 15,000 - 15,000 468,750 - 79,765 (15,000) - 64,765 - - - - (23,608) (23,608)
Balance,December 31,2020	12,495,037 -$ 1,994,392 $ 94,200 $ (608,326) $ 1,480,266
Common shares issued on completion of the RTO by Fathom Minerals Ltd. 4 Common shares issued for cash, net of share issue costs 8 Flow-through special warrants issued for cash, net of share issue costs 8 Non flow-through special warrants issued for cash, net of share issue costs 8 Non flow-through special warrants issued for services 8 Unrenounced flow-through share premium 8 Fair value of compensation options 8 Fair value of broker warrants Fair value of options Conversion of flow-through special warrants into common shares 8 Conversion of non flow-through special warrants into common shares 8 Conversion of non flow-through special warrants into common shares 8 Loss and comprehensive loss	13,295,038 - 2,659,007 - - 2,659,007 3,675,000 - 719,065 - - 719,065 - 3,129,317 2,030,744 - - 2,030,744 - 12,486,323 - - - - - 230,678 161,475 - - 161,475 - - (625,863) - - (625,863) - - (46,297) 214,340 - 168,043 - - (34,879) - - (34,879) - - - 662,500 - 662,500 3,129,317 (3,129,317) 1,542,523 - - 1,542,523 12,486,323 (12,486,323) 6,154,836 - - 6,154,836 230,678 (230,678) 113,707 - - 113,707 - - - - (4,676,293) (4,676,293)
Balance, September 30, 2021	45,311,393 -$ 14,668,710 $ 971,040 $ (5,284,619) $ 10,355,131

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

FATHOM NICKEL INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED SEPTEMBER 30, 2021 and 2020 (Unaudited)

			Three Months	Ended	Sept	30		Nine Months	Ended	Sept 30
Note			2021		2020			2021		2020
Cash flows from operating activities
Net loss for the period		$	(534,102)	$		(34)	$	(4,676,293)	$	(7,626)
Add back / Deduct non cash expenses
Finance expense	4		-			-		2,672,145		-
Stock based compensation			141,500			-		662,500		-
Gain on sale of marketable securities			-			-		-		(2,882)
			(392,602)			(34)		(1,341,648)		(10,508)
Working capital changes
Goods and services tax receivable			(78,601)			-		(197,192)		(1,711)
Prepaids and deposits			27,641			-		(194,219)		-
Interest receivable			415			-		(2,261)		-
Accountspayable and accrued liabilities			51,762			-		93,315		(79,115)
Cash flows used in operatingactivities			(391,385)			(34)		(1,642,005)		(91,334)
Cash flows provided by (used in) from investing activities
Proceeds from the sale of marketable securities			-			-		-		20,382
Property and equipment			-			-		(5,616)		-
Exploration and evaluation assets	5		(1,315,418)			-		(3,012,015)		(84,358)
Workingcapital changes			756,133		(1,574)			968,004		(144,856)
Cash flows used in investingactivities			(559,285)		(1,574)			(2,049,627)		(208,832)
Cash flows provided by (used in) from financing activities
Issue of common shares for services			-			-		-		162,911
Issue of common shares for cash, net of share
issuance costs	8		-			-		719,065		-
Issue of special warrants for cash, net of share issuance costs
issuance costs	8		-			-		10,136,449		-
Amounts due to directors	10		-			-		(1,991)		70,167
Cashprovided byfinancingactivities			-			-		10,853,523		233,078
Net change in cash			(950,670)		(1,608)			7,161,891		(67,088)
Cash,beginningof theperiod			8,121,831		21,741			9,270		87,221
Cash, end of theperiod		$	7,171,161	$	20,133		$	7,171,161	$	20,133
Non-cash investing and financing activities, see Notes 5 & 10

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

FATHOM NICKEL INC. NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SPETEMBER 30, 2021 and 2020

1. REPORTING ENTITY

Fathom Minerals Ltd. (“FML”) is an exploration stage company engaged in locating, acquiring and exploring for base and precious metals in Canada. FML was incorporated pursuant to the Business Corporations Act (Alberta) on April 27, 2012. On January 22, 2021, FML acquired 100% of Fathom Nickel Inc. (“FNI” or the “Company”), a privately-held Alberta corporation, in a reverse takeover (“RTO”) transaction. The RTO was effected by means of a share-for-share exchange under which the former shareholders of FML acquired control of FNI. (Note 4). On May 25, 2021 FNI commenced trading on the CNSX under the symbol FNI. The comparative figures presented are those of FML.

The condensed interim consolidated financial statements (“interim financial statements”) as at and for the three and nine-month periods ended September 30, 2021 comprise all entities in which FNI has a controlling interest, being FNI and FML. The consolidated entity is referred to as the Company or Fathom Nickel Inc. Intercompany balances and transactions are eliminated on consolidation.

The address of the Company's corporate office and principal place of business is #104, 1240 – Kensington Road NW, Calgary, Alberta, T2N 3P7.

The interim financial statements were authorized for issue by the board of directors on November 29, 2021.

2. BASIS OF PRESENTATION

2.1 Statement of compliance

These interim financial statements for the three and nine months ended September 30, 2021 have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (“IAS 34”), as issued by the International Accounting Standards Board (“IASB”) and should be read in conjunction with FML’s audited annual financial statements for the fiscal year ended December 31, 2020.

2.2 Significant estimates and assumptions

The preparation of the Company’s interim financial statements requires management to make judgments, assumptions and estimates that affect the reported amounts of assets and liabilities at the date of the interim financial statements and the 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 which are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

In preparing these interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to FML’s annual financial statement as at and for the year ended December 31, 2020. The following are additional estimates and judgements made during the period ended September 30, 2021:

The Company measures the fair value of the flow through premium liability included using an option pricing model. This estimate requires determining the most appropriate inputs to the valuation model including the expected life of the warrant, volatility, dividend yield, and rate of forfeitures and making assumptions about them. The value of the flow through premium liability along with the assumptions and model used for estimating fair value are disclosed in Note 8.

During and subsequent to the period end, there was a continued global outbreak of COVID-19 (coronavirus), which has had a significant impact on businesses through the restrictions put in place by the Canadian, provincial and municipal governments regarding travel, business operations and isolation/quarantine orders. Uncertainties may continue to arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place by Canada and other countries to fight the virus. While the full extent of the impact is unknown, we anticipate this outbreak may cause additional negative

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FATHOM NICKEL INC. NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SPETEMBER 30, 2021 and 2020

impacts on the Company’s business and financial condition.

2.3 Basis of measurement

The interim financial statements have been prepared on a historical cost basis, except for certain financial instruments which have been measured at fair value.

2.4 Functional and presentation currency

The financial statements are presented in Canadian dollars, which is the Company's functional and presentation currency.

3. SIGNIFICANT ACCOUNTING POLICIES

The financial framework and accounting policies applied in the preparation of these interim financial statements are consistent with the policies disclosed in Notes 3 and 4 of the audited annual financial statements of FML for the year ended December 31, 2020. The following additional policy notes have been incorporated for the period ending September 30, 2021.

Flow-through shares

The Company finances some exploration and evaluation expenses through the issuance of flow-through shares with flow-through special warrants. The resource expenditure deductions for income tax purposes are renounced to investors in accordance with the appropriate income tax legislation. The difference (“premium”) between the amounts recognized in common shares and the amount the investors pay for the shares is recognized as a flowthrough share related liability which is reversed into the statement of loss and comprehensive loss as a recovery of deferred income taxes when the eligible expenditures are incurred. The amount recognized as a flow-through share liability represents the difference between the quoted price of the common shares and the amount the investor pays for the flow-through shares, net of allocated issue costs.

4. REVERSE TAKE-OVER

Pursuant to a Share Purchase Agreement (the “SPA”) dated January 6, 2021, the Company agreed to acquire 100% of the issued and outstanding common shares of FML via a share-for-share exchange (the “Transaction”). Each former shareholder of FML shareholder received one (1) share of the Company in exchange for each share of FML beneficially owned. As FNI was an entity with no operations, it did not meet the definition of a business under IFRS 3. Accordingly, the Transaction is accounted for as a reverse acquisition along with a share-based payment in accordance with IFRS 2. The Transaction closed on January 22, 2021. Immediately upon closing of the Transaction, the original shareholders of FNI held 13,295,038 common shares. There were 25,790,075 shares outstanding at that date of which former shareholders of FML held 48.4%. After the Transaction, the Management and Directors of FML were appointed to their respective Board and Management positions with the Company. As a result, the acquirer is determined to be FML. The shares held by the original shareholders of FNI were valued at a price of $0.20/share for a total transaction value of $2,659,007. The fair value of the Company was determined based on the number of shares issued to shareholders of FNI at a price of $0.20/share around the time of the Transaction.

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FATHOM NICKEL INC. NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SPETEMBER 30, 2021 and 2020

$2,659,007 has been allocated as follows:

Accounts payable and accrued liabilities Finance expense Consideration comprised of: Fair value of common shares	$ (13,138) 2,672,145 $ 2,659,007 $ 2,659,007

5. EXPLORATION AND EVALUATION ASSET

Albert Lake Exploration & Evaluation Asset

lbert Lake Exploration & Evaluation Asset
	Nine months		Year ended
	ended Sept			Dec. 31,
		30, 2021		2020
Balance beginning of period – Albert Lake Property	$	1,483,587	$	1,398,979
Acquisition cost and leases		35,120		67,385
Exploration		2,976,895		17,223
Balance end ofperiod – Albert Lake Property	$	4,495,602	$	1,483,587

As at September 30, 2021, the Company’s 100% owned Albert Lake Property was comprised of 28 contiguous mineral dispositions (totaling 90,144 hectares) issued by and registered with the Saskatchewan Ministry of Energy and Resources. The Albert Lake Property is located approximately 135 kilometers north-northeast of La Ronge in north central Saskatchewan.

The Company is required to incur annual minimum work program expenditures ranging between $15.00 and $25.00 per hectare in order to maintain title to the dispositions. Excess qualifying exploration expenditures can be carried forward indefinitely to be applied to future years’ work requirements. The Company is required to incur annual qualifying expenditures of $590,140 in 2021 in order to maintain all dispositions in good standing. As at the period end, the Company had fulfilled this spending requirement.

The initial six mineral dispositions, totaling 10,439 hectares, were acquired from Uravan Minerals Inc. in April 2015 in exchange for the issuance of 2,000,000 common shares of the Company. This original 10,439 hectares are subject to a 2% net smelter return (“ NSR ”) royalty interest pertaining to any future commercial production from the associated mineral dispositions. One percent of the NSR can be acquired at any time, at the option of the Company, for a one-time cash payment of $1,000,000.

On June 8, 2015, the Company acquired an additional 1,348 hectares in two mineral dispositions from an individual land consultant in exchange for the issuance of 500,000 common shares of the Company and a cash payment of $5,000. The 1,348 hectares covered by the purchase agreement are subject to a 1% NSR royalty interest pertaining to any future commercial production from the associated mineral dispositions. The NSR can be acquired at any time, at the option of the Company, for cash payments totaling $500,000.

The Company acquired 8 mineral dispositions directly through the staking system of the Saskatchewan Ministry of Energy and Resources during the period from 2016 through 2020. During the nine-month period ended September 30, 2021, the Company acquired eleven additional mineral dispositions directly

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FATHOM NICKEL INC. NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SPETEMBER 30, 2021 and 2020

through the staking system of the Saskatchewan Ministry of Energy and Resources and one mineral disposition from an arm’s-length party.

6. CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Unrestricted cash	September 30, 2021 Dec 31,2020
	$ 7,171,161$ 9,270
	$ 7,171,161$ 9,270

All cash and cash equivalents are held in Canadian banks and registered brokerage firms.

7. GOODS AND SERVICES TAX AND OTHER RECEIVABLES

Goods and Services Tax	September 30, 2021 Dec 31,2020
	$ 217,305 $ 20,113

8. SHARE CAPITAL

Authorized: Unlimited number of common shares without a value

Authorized and issued Balance, beginning of the period Issued for services(i) Issued on conversion of debenture(ii) Issued on completion of the RTO (Note 4) Issued for cash(iii) Issued on conversion of Special Warrants Balance, end of the period Balance, beginning of the period Issued for services, net of share issuance costs Issued on conversion of debenture Issued on completion of the RTO (Note 4) Issued for cash (iii) Issued on conversion of NFT Special Warrants (v) Issued on conversion of FT Special Warrants (v) Flow through premium liability Balance, end of the period	Nine months ended September 30, 2021 Year ended Dec 31,2020
	Number of common shares
	12,495,037 11,332,080 - 694,207 - 468,750 13,295,038 3,675,000 - - 15,846,318 -
	45,311,393 12,495,037
	$ 1,994,392$ 1,751,716 - 162,911 - 79,765 2,659,007 719,065 - - 7,811,066 - 2,111,043 - (625,863) - $ 14,668,710$ 1,994,392

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FATHOM NICKEL INC. NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SPETEMBER 30, 2021 and 2020

Special Warrants Balance, beginning of the period Issued for cash (iv) Issued for services(iv) Converted to common shares upon CSE listing (v) Balance, end of the period Balance, beginning of the period Issued for cash, net of share issuance costs (iv) Issued for services (iv) Special warrant liability (iv), (v) Flow through premium liability (iv) Transfer flow through premium to common shares (iv) Conversion of FT Special Warrants to common shares (iv) Balance, end of the period
	Nine months ended September 30, 2021 Year ended Dec 31,2020 Number of Special Warrants
	- - 15,615,640 - 230,678 - (15,846,318) -
	- - $ -$ - 9,760,634 - 161,475 - (7,811,066) - (625,863) - 625,863 - (2,111,043) -
	$ -$ -

• (i) In January 2020, the Company completed the issuance of 694,207 common shares at $0.24 per share in exchange for administrative and geological consulting services previously provided to the Company. The cost of the administrative and geological consulting services had been accrued in the accounts of the Company and expensed as administrative consulting fees, or capitalized as exploration and evaluation asset, based on market rates for comparable services. See Note 10, related parties.

• (ii) In December 2020, the Company executed the conversion of five outstanding convertible debentures totaling $75,000 for 468,750 shares at a conversion price of $0.16 per share. Accrued interest of $4,192 at the year end date was paid in cash to the debenture holders. See Note 10, related parties for further discussion on convertible debt.

• (iii) Subsequent to the closing of the Transaction described in Note 4, the Company completed a private placement of 3,675,000 common shares (the "Private Placement") at a price $0.20 per share for gross proceeds of $735,000. The Private Placement was sold on a non-brokered basis to accredited investors. The Company incurred issuance costs of $15,935 related to the private placement.

• (iv) On March 15, 2021, FNI completed a brokered financing of 12,486,323 Non-Flow Through Special Warrant Units (the "NFT Special Warrant Units ") at a price $0.70 per NFT Special Warrant Unit and, 3,129,317 Flow Through Special Warrant Units (the "FT Special Warrant Units") at a price $0.77 per FT Special Warrant for gross proceeds of $11,150,000. Together the NFT Special Warrant Units and the FT Special Warrant Units are referred to as “Special Warrants”. Each FT Special Warrant was exchangeable, at no additional cost, into one FNI common share. Each NFT Special Warrant Unit was exchangeable, at no additional cost, into one FNI common share and one half of one FNI share purchase warrants (“FNI Unit”). However, had the final receipt for the non-offering prospectus not been obtained within 60 days of the closing of the Special Warrant financing (ie, May 14, 2021), then, as a penalty to the Company, each holder of a NFT Special Warrant would have been entitled to 1.15 Units per Special Warrant instead of one (1) Unit. As a result, and because the number of common shares to be issued on conversion of the NFT Special Warrant Units was variable, the net proceeds related to the NFT Special Warrant Units was presented as a liability from the date of closing of the Special Warrant Financing through the date of conversion. See paragraph (v) below.

Each full FNI share purchase warrant entitles the holder to purchase one FNI common share at an exercise price of $1.00 per FNI common share within two years of the Listing Date.

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FATHOM NICKEL INC. NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SPETEMBER 30, 2021 and 2020

Each NFT Special Warrant was deemed to be automatically exercised immediately on the earlier of: (i) the date that is the fifth Business Day after the date on which the receipt for a final prospectus qualifying the distribution of the NFT Shares issuable upon the exercise or deemed exercise of the NFT Special Warrants has been issued by the last of the Securities Regulators in a Designated Jurisdictions; and (ii) the date that is 4 months and one day after the issuance of the NFT Special Warrant. The Company received the receipt for the final prospectus on May 13, 2021, thus triggering the automatic conversion of the Special Warrants into FNI common shares and FNI Units as at May 18, 2021. As the receipt for the final prospectus was obtained prior to the 60[th] day from the closing of the Special Warrant financing, no penalty was applied and each NFT Special Warrant Holder received 1.0 Units on conversion.

The flow through premium liability associated with the issuance of the FT Special Warrants was calculated at $0.20 per FT Special Warrant, based on a share price of $0.57, which in turn was estimated by determining the standalone value of a warrant using the Black-Scholes model and subtracting this from the unit price. The following weighted average assumptions were used: (I) dividend yield of 0%; (II) expected volatility of 110%; (III) a risk free interest rate of 1%; (IV) an expected life of 2 years and (V) a Special Warrant price of $0.70. Expected volatility was based on comparable companies. This resulted in a flow through premium liability of $625,863.

In connection with the issuance of the Special Warrants the Company paid $1,013,551 in fees. It also issued 230,678 NFT Special Warrants issued to the Agents which were valued at the NFT Special Warrant price of $0.70 per NFT Special Warrant as described above, resulting in a fair value of $161,475. The agents were also granted 1,071,669 broker special warrants, exercisable at a price of $0.70 per broker warrant into one common share and ½ common share purchase warrant of FNI for a period of two years from the date of the closing of the financing, or March 15, 2023. Each whole common share purchase warrant, in turn, is exercisable into one (1) common share at a price of $1.00 per share for a period of two years from the closing of the financing, or March 15, 2023.

The fair value of the common share purchase warrants issued were estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions: (I) dividend yield of 0%; (II) expected volatility of 110%; (III) a risk free interest rate of 1%; (IV) an expected life of 2 years and (V) a Special Warrant price of $0.70. Expected volatility was based on comparable companies. This resulted in a fair value of $0.20 per broker warrant for a total of $214,340.

The total share issuance costs for the issuance of the Special Warrants amounted to $1,389,366.

• (v) On May 18, 2021, 5 days after the final receipt of the final non-offering prospectus, each outstanding NFT Special Warrant Units automatically converted into one FNI common share and one half of one FNI share purchase warrant. On conversion, the outstanding Special Warrant Liability of $7,811,066 was eliminated and Share Capital was increased by this amount.

On May 18, 2021 each outstanding FT Special Warrant was converted into one FNI common share valued, net of fees and expenses, at $2,111,043.

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FATHOM NICKEL INC. NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SPETEMBER 30, 2021 and 2020

Stock option plan

The Company has a stock option plan to provide employees, directors, officers and consultants with options to purchase common shares of the Company. Under the plan, the exercise price of each option equals the market price of the Company’s stock on the day of grant and the maximum term of option is four years. Options vest immediately upon issuance. The maximum number of shares which may be issued under the program shall not exceed 10% of the issued and outstanding shares. The following summarizes the employees, directors, officers and consultants stock options that have been granted, exercised, expired, vested or cancelled during the year ended December 31, 2020 and 2019:

Balance, Dec 31, 2019 Expired Cancelled Balance, Dec 31, 2020 Granted Balance, September 30, 2021	Number of Options Issued and Vested Weighted Average Exercise Price
	2,485,000 $ 0.05 (1,485,000) - (1,000,000) -
	- $ - 3,000,000 0.70
	3,000,000 $ 0.70

The Company provides compensation to directors, employees and consultants in the form of stock options.

On December 31, 2020, the Company and the holders of the options granted in 2018 agreed to cancel the remaining options not yet expired.

The fair value of the options issued were estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions: (I) dividend yield of 0%; (II) expected volatility of 110%; (III) a risk free interest rate of 1%; (IV) an expected life of 5 years and (V) a common share price of $0.50. Expected volatility was based on comparable companies. This resulted in a fair value of $0.37 per options for a total of $1,112,827. The options vest 1/3 at the grant date, 1/3 on 1[st] on the first anniversary and 1/3 on 2[nd] on the second anniversary.

The Company granted 115,000 restricted share units (RSUs) to officers of the Company. The RSUs vest 1/3 on 1[st] on the first anniversary, 1/3 on 2[nd] on the second anniversary, and 1/3 on 3r[d] on the third anniversary. Stock based compensation shares related to the RSUs for the period ending September 30, 2021 was nominal.

Warrants

Other than warrants issued in connection with the special warrants noted above there were no other warrants issued during the period or outstanding at September 30, 2021 or December 31, 2020.

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FATHOM NICKEL INC. NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SPETEMBER 30, 2021 and 2020

9. EARNINGS/LOSS PER SHARE

The calculation of basic loss per share for the nine months ended September 30, 2021 of $0.11 (2020 - Nil) was based on the loss attributable to shareholders of the Company of $4,676,293 (2020 - $7,626), and a weighted average number of common shares of 42,524,428 (2020 - 12,005,944). The calculation of basic loss per share for the three months ended September 30, 2021 of $0.01 (2020 - Nil) was based on the loss attributable to shareholders of the Company of $534,102 (2020 - $34), and a weighted average number of common shares of 45,311,393 (2020 - 12,026,287).

10. RELATED PARTIES

The following related party transactions occurred and were charged in the financial statements during the three and nine-month periods ended September 30, 2021 and 2020 as follows:

	3 months ended September 30, 2021 3 months ended September 30, 2020
Administrative consulting fees were charged by officers for corporate administrative and financial management services Consulting fees were charged by officers for geological management of the Company’s exploration and evaluation asset	$ 67,696 $ Nil $ 52,389 $ Nil 9 months ended September 30, 2021 9 months ended September 30, 2020
Administrative consulting fees were charged by officers for corporate administrative and financial management services Consulting fees were charged by officers for geological management of the Company’s exploration and evaluation asset	$ 169,086 $ Nil $ 125,099 $ Nil

Amounts accrued and paid as administrative consulting fees are expensed; amounts accrued and paid as geological consulting fees are capitalized to the exploration and evaluation asset account. At September 30, 2021, the Company owed the respective holding companies owned by officers of the Company for administrative and geological consulting fees $Nil (December 31, 2020 - $Nil). The Company issued 694,207 common shares in January 2020 to settle a portion of the amount due to officers of the Company, see Note 8 share capital.

Due to directors	3 and 9 months ended September 30, 2021 Year ended December 31, 2020
	$ Nil $ 1,991
	$ Nil $ 1,991

At period end, the Company owed a director of the Company $Nil (December 31, 2020 - $1,991) related to

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FATHOM NICKEL INC. NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SPETEMBER 30, 2021 and 2020

the initial capitalization of the Company. This amount owing bears no interest and has no stated terms of repayment.

11. COMMITMENTS AND CONTINGENCIES

• i) The Company has a commitment to spend $53,300 from amounts raised through flow-through financing in 2019 on eligible Canadian exploration and development expenses. As a result of COVID19 restrictions, on July 10, 2020 the Department of Finance announced that the time with which eligible corporations would have to incur expenditures was extended by 12 months. In the Company’s case, the extension means that it must incur the eligible expenses by December 31, 2021. At December 31, 2020, the Company was still required to incur the full $53,300 of exploration expenses in order to fulfill its spending obligations. At September 30, 2021, the Company fulfilled its spending obligations on eligible expenditures at its Albert Lake project for the full $53,300 of required exploration expenses.

• ii) The Company has a commitment to spend $2,409,574 from amounts raised through flow-through financing in 2021 on eligible Canadian exploration and development expenses prior to December 31, 2022. During the period from April 1 to September 30, 2021, the Company had incurred $2,064,356 of qualifying exploration and development expenses resulting in a remaining requirement to incur $345,218 of qualifying exploration and development expenses prior to December 31, 2022. The Company expects to incur the balance of qualifying expenditures and renounce the flow through expenses to subscribers prior to December 31, 2021.

• iii) As disclosed in Exploration and Evaluation Asset (Note 5), the Company is required to incur annual minimum work program expenditures ranging between $15.00 and $25.00 per hectare in order to maintain title to the dispositions. Excess qualifying exploration expenditures can be carried forward indefinitely to be applied to future years’ work requirements. At December 31, 2020, the Company had a commitment to incur qualifying expenditures of $57,681 during dates ranging from April 20 to June 10, 2021 in order to maintain all mineral dispensations in good standing. At the financial statement date, the Company had fulfilled its spending obligations on eligible expenditures at its Albert Lake project.

• iv) The Company’s activities are subject to environmental regulation (including regular environmental impact assessments and permitting) in each of the jurisdictions in which its mineral properties are located. Such regulations cover a wide variety of matters including, without limitation, prevention of waste, pollution and protection of the environment, labour relations and worker safety. The Company may also be subject under such regulations to clean-up costs and liability for toxic or hazardous substances which may exist on or under any of its properties or which may be produced as a result of its operations. It is likely that environmental legislation and permitting will evolve in a manner which will require stricter standards and enforcement. This may include increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a higher degree of responsibility for companies, their directors and employees.

The Company has not determined and is not aware that any provision for such costs is required and is unable to determine the impact on its financial position of environmental laws, if any, and regulations that may be enacted in the future due to the uncertainty surrounding the form that these laws and regulations may take.

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FATHOM NICKEL INC. NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED SPETEMBER 30, 2021 and 2020

12. EVENTS AFTER THE REPORTING PERIOD

On November 29, 2021 the Company completed a marketed offering of flow-through shares (the “Offering”). Under the Offering the Company issued 10,000,000 flow-through common shares (the “FT Shares”) at a price per FT Share of $0.40 (the “FT Price”) for gross proceeds of $4,000,000. Echelon Wealth Partners Inc. acted as Lead Agent and sole bookrunner for a syndicate that also included Sprott Capital Partners LP and Research Capital Corporation (collectively the “Agents”). The Company has granted the Agents an option to purchase up to an additional 15% of the FT Shares sold under the Offering. The Over-Allotment Option may be exercised in whole or in part as determined by the Agents upon written notice to the Company at any time up to 30 days following the closing date of the Offering (the "OverAllotment Option").

As consideration for its services in connection with the Offering, the Company has paid to the Agents a cash commission of 7.0% of the gross proceeds of the Offering and issued to the Agents broker warrants (“Broker Warrants”) equal to 7.0% of the number of FT Shares sold under the Offering. Each Broker Warrant will entitle the holder thereof to acquire one common share of the Company at the offering price for a period of 18 months from the Closing Date.

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